Many experts will keep an eye on the RBI governor’s position on liquidity, however.

The Monetary Policy Committee (MPC) headed by Reserve Bank Governor Shaktikanta Das will announce its policy decision tomorrow, at the end of the bimonthly review that began on Wednesday. The RBI governor had kept benchmarks unchanged at his last policy meeting in June, keeping the repo rate at 4 percent and the repo rate at 3.35 percent. Monetary policy makers will keep interest rates at record highs at the next policy meeting, experts say, as the slow easing of localized lockdowns, slow vaccinations and the looming threat of another wave continue to grow. ‘hamper economic recovery.

Here’s what to expect from the RBI policy scheduled for tomorrow

  1. The 61 economists polled by Reuters said they did not expect any change in the repo rate, which has been stable at 4% since May of last year. But they expect the central bank to make two increases of 25 basis points for the next fiscal year, raising the repo rate to 4.50% by the end of March 2023.

  2. Many experts will keep an eye on the RBI governor’s position on liquidity, however. The RBI kept excess rupee cash in the banking system, with a daily surplus exceeding Rs 6 trillion, to help the economy weather the pandemic.

  3. The manufacturing and service sectors, which account for more than two-thirds of India’s gross domestic product, have been going through a rough patch in recent times.

  4. India’s seasonally adjusted services trade activity index posted 45.4 in July, a third consecutive month in contractionary territory amid subdued demand. However, it fell from 41.2 in June, suggesting a slower rate of reduction.

  5. Industrial production rose but at a slower pace, increasing 29.3% in May from a year earlier, compared to nearly 135% in April. The large increase is due to a base effect, as the country was under strict lockdown during the same period last year. But more importantly, month-over-month industrial production fell 8.0% from April.

  6. Traders expect yields to rise further, but the central bank can intervene directly or through an open market operation to prevent a sharp rise in yields and control government borrowing costs.

  7. The Monetary Policy Committee (MPC) has kept policy rates unchanged over the past five monetary policy meetings. The banking regulator last cut its policy rates on May 22, 2020, in a non-political cycle when the covid-19 pandemic first rocked the country.

  8. The Reserve Bank has reduced its policy rates, i.e. the repo rate, by 115 basis points since March 2020 to protect the economy from the aftershock of the coronavirus.

  9. Meanwhile, last week the International Monetary Fund (IMF) lowered India’s growth projection from 12.5 percent to 9.5 percent for fiscal year 2021-2022 – down three percentage points , following the severe second wave of the COVID-19 pandemic in the country.

  10. However, for the next fiscal year 2022-2023, the IMF revised the economic growth estimate for India from 6.9% to 8.5%, an increase of 1.6 percentage points.


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