The members of the Reserve Bank of India's fourth bi-monthly monetary policy Committee began their three-day meeting today, and are expected to announce the outcome on Friday
Given inflation pressure, there is no doubt that it would be difficult for the MPC to cut rates in the near-term
The three new members represent a diversity of experience and have engaged with policy making through their careers
The central bank has been taking steps proactively to limit the damage to the economy caused by the pandemic and lockdown
Demand impact will continue to weigh heavily on economic activity for some time, says Shaktikanta Das, but is optimistic about rural economy due to good farm harvest
While efforts are being mounted on a war footing to arrest its spread, Covid-19 would impact economic activity in India directly through domestic lockdown, the central bank has said
Following the November print of 5.54%, RBI had sprung a surprise and opted to hold the repo rate at 5.15 per cent. It, however, continued with the accommodative stance as long as it was necessary.
When expected inflation drops, the policy rate should drop even more
Citing geo-political uncertainties and elevated food prices, the RBI revised inflation projection upward to 3.4 per cent for Q2FY20, while projections were retained at 3.5-3.7 per cent for H2FY20
What is telling is that large swings in the Indian business cycle are still not a thing of the past, despite the adoption of inflation targeting in India
Economists divided on MPC outcome; say it will be a tough decision to make
The decision to maintain the status quo was made against the backdrop of the retail inflation rate, measured by CPI, rising for the sixth consecutive month in December
There is wide expectation that the MPC will keep the repo rate unchanged given the gradual rise in retail inflation
In Dholakia's assessment, core inflation is on a declining path with minor spikes