Despite gross domestic product (GDP) growth being lower-than-expected for the July-September quarter, the six-member Monetary Policy Committee (MPC) may not cut the policy repo rate in the review meeting scheduled for next week due to high inflation in October, according to experts. "Consumer Price Index (CPI) inflation breaching the upper limit of the RBI's tolerance band in October (6.2 per cent year-on-year) is not a favourable backdrop for the MPC to commence the easing cycle, even as the growth outcome disappointed the MPC's expectations," said Shreya Sodhani, regional economist at Barclays, who expects the policy repo rate to be kept unchanged in the December meeting.
With concern on food inflation ebbing with the monsoon progressing well, the Reserve Bank of India (RBI) is warming up to the idea of a change in stance to "neutral" from "withdrawal of accommodation", according to economists. In his speech on Thursday during the annual event of the Federation of Indian Chambers of Commerce and Industry-Indian Banks' Association, RBI Governor Shaktikanta Das said: "The balance between inflation and growth is well-poised."
If the current restrictions remain in place until the end of May, we estimate that the cumulative loss of activity could amount to around $10.5 billion, or around 0.34 percentage point (pp) of annual nominal gross domestic product, say Barclays economists.
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