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Below the Expectation on RBI Monetary Policy Committee by Mr. Ajit Banerjee President & Chief Investment Officer, Shriram Life Insurance Company

"All eyes are now on the RBI MPC meeting scheduled to be held on October 7-9 whether it will follow the path shown by the Fed by starting the rate cut cycle or continue to maintain the status quo on both the policy rates and stance. As far as our house view is concerned, we feel that the MPC would continue to maintain status quo on the policy rates, since it would like to start the rate cut cycle once it gets convinced that CPI inflation has been controlled in a relatively durable way and it will not be vulnerable to the food inflation fluctuations intermittently. Further, India, as of now, doesn’t face the challenge of the GDP growth falling consistently. The low GDP growth numbers of 6.7% in Q1 were primarily driven by adverse base effect and a slowdown in government-driven investment expenditures due to general elections in Q1. This was the main driving force behind the GDP growth of the country. Much to our relief, the government capex has resumed in Q2, and therefore, GDP growth numbers would fall in line with RBI projections. There would also be reconstitution of the MPC this time with the appointment of three external members, so it seems to be unlikely that we can expect any significant change in this meeting. That said, a shift to a neutral stance isn’t completely ruled out. A dovish tone in the governor’s commentary could also set the direction moving forward."

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