RBI's 3-day MPC meet begins: What to expect
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) began its three-day meeting today. Experts are predicting no changes to interest rates. The six-member MPC, led by RBI Governor Shaktikanta Das, will announce their decision on December 8. India's GDP growth is picking up and inflation remains under control, with the repo rate staying the same in the last four bi-monthly monetary policies.
Factors influencing MPC's decision
Analysts expect the MPC to be cautious about inflation, which is still above its 4% target. Factors like fluctuating crude oil prices, concerns around El Nino and agricultural output could influence the central bank's decision to maintain its pause mode. Suman Chowdhury, Chief Economist and Head of Research at Acuité Ratings & Research stated that there is a strong likelihood for RBI to continue to keep the benchmark repo rate unaltered at 6.5% for the next six months.
GDP growth and inflation projections
Deutsche Bank Research forecasts that the RBI will likely raise its FY24 GDP prediction to 6.8% year-on-year from 6.5% while keeping the CPI forecast at 5.4%. Considering higher GDP data for Q2 FY24 and ongoing concerns about food inflation, Aditi Nayar, Chief Economist at ICRA, expects "the MPC to pause in its December 2023 review, amidst a fairly hawkish tone of the policy document."
Industry expectations and potential rate easing
Sanjay Bhutani, Director of Medical Technology Association of India (MTaI), expects a similar outcome to previous MPC meetings with unchanged policy rates. However, he mentioned that with inflation decreasing, interest rates could ease as early as February-March 2024. This would benefit all sectors, especially capital and research-intensive industries like medical technology.
Impact on consumer durable industry
HS Bhatia, Managing Director of Kelwon Electronics and Appliances, emphasized that RBI's monetary policy decisions will significantly impact the consumer durable industry. He said, "The industry is hoping that RBI will keep interest rates stable or even reduce them slightly in the upcoming review so that consumers get enough purchasing power." Parijat Agrawal, Head of Fixed Income at Union Asset Management Company, also expects the MPC to remain on pause regarding rates and stance.
