The Reserve Bank of India (RBI) is expected to increase its policy rate by 25 basis points to 6.50% in the February’s meeting, one week after New Delhi’s budget on February 1, according to a Reuters poll and maintaining the rate until the end of the year.
The forecast from the poll last month predicted that GDP growth would slow down to 6.0% in the 2023/24 fiscal year from the expected 6.7% in 2022/23.
A 6.0% growth looked faster than the economies of other countries around the world, but it might not be enough to increase the number of jobs required to elevate hundreds of millions of Indians out of poverty.
The RBI expects to pause its rate hikes and wait for inflation to fall before making any decision on its stance toward rates. The economists, 40 of 52, expected the RBI would increase its key repo rate to 6.50%.
Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said that the RBI needs to pause at some point and figure out the exact impact of prior monetary policy on the overall growth and inflation.
The inflation rate last year was 5.72% in December. Prices are expected to average at 5% this fiscal year and 4.9% in 2024/25, which would be within the RBI’s target range of 2%–6% after staying high for most of 2022.
Narendra Modi, the prime minister, intends to lower the fiscal deficit rather than extra spending. The recession in the global economy suggests downgrades to India’s outlook seem to be arriving in the next few months.
