Perspectives on RBI MPC Data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
Below the Perspectives on RBI MPC Data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings
As expected, the RBI’s MPC chose to maintain a status quo on policy interest rate and its stance, given the fluid global environment. Given the expectations of high energy prices and supply side bottlenecks, the GDP growth forecast for FY27 has been revised downwards to 6.9%, on assumption of crude oil averaging US$ 85/bbl. The RBI has highlighted that there is downward risk to growth. Our growth projection for FY27 is 6.7%, based on assumption of crude oil averaging US$ 90/bbl. While a ceasefire to West Asia war has been announced for two weeks, a lot will depend on how the conflict situation settles down and time taken for restoration of supply bottlenecks. RBI projects inflation for FY27 at 4.6%, in line with our expectations. It is important to note that core inflation excluding precious metals remains benign.
Going forward, we expect the Central Bank to maintain status quo on policy interest rate. While there are upside risks to inflation, the impact of higher global crude oil prices on CPI inflation will somewhat be mitigated by sharing of the burden between government, OMCs and households. Given the lingering growth concerns, RBI will not be in a hurry to reverse the rate cycle.
With respect to the rupee, some easing of geopolitical uncertainties following the recent ceasefire should provide some support to the currency. However, the RBI is likely to remain vigilant and continue its efforts to curb excessive volatility in the foreign exchange market. We expect USD/INR to average 92-93 levels in FY27, on the assumption of global crude oil prices averaging US$ 90/bbl.
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