Perspective on RBI MPC by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
Below the Perspective on RBI MPC by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
“The MPC’s decision in its February meeting to maintain status quo on both the policy rate and stance was in line with our expectations. The committee revised up its average growth projection for H1FY27 by 20 bps to 7%, while CPI inflation projections for FY26 and H1FY27 each were raised by 10 bps. Based on our estimates, the proposed tariff reduction could add ~ 20 bps to GDP growth, leading us to project growth of 7.2% for FY27. CPI inflation is expected to average close to 4% in FY27. However, the forthcoming new series for both CPI and GDP will need close monitoring, as these could lead to minor revisions to our projections.
On the liquidity front, the Governor reiterated the RBI’s commitment to maintaining comfortable liquidity conditions through timely interventions as required. We expect the RBI to continue liquidity injection measures, particularly in the second half of March when tax-related outflows typically intensify. A comfortable liquidity condition is critical for transmission of the previous rate cuts. On the external front, easing trade policy uncertainties after the recent trade deals are likely to lend some support to the rupee. This may allow the RBI to scale back its forex market interventions, which had increased in the recent months amid elevated volatility. Reduced intervention would be supportive of rupee liquidity. Going ahead, we do not expect further rate cuts from the RBI unless downside tail risks to growth materialise.”
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