The Reserve Bank of India is expected to refrain from undertaking policy reversal in the forthcoming monetary policy to be announced on April 8, 2022, according to FICCI survey. Even though upside risks to inflation have magnified with the escalation of Russia and Ukraine conflict and the growth-inflation dynamics has also come under lens, the monetary policy committee is expected to look through temporary inflation spikes in the near term. RBI is expected to continue to support the ongoing economic recovery by keeping policy repo rate unchanged in April announcement. Growth impulses are still nascent and consumer confidence has been subdued and is yet to get back to pre-pandemic levels.
The skyrocketing prices of crude oil and industrial inputs is pressurizing prices through imported inflation. However, the Reserve Bank of India will look at reversing its stance in the second half of the current year (2022) and one can expect a rate hike between 50-75 bps by end of this fiscal year. Given that inflation in India has been supply driven, support from government in terms of fiscal measures such as reduction in excise duty and VAT on petrol/diesel by Centre and states have the potential to mitigate some immediate concern on inflation.
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