Mumbai: The Reserve bank of India’s (RBI) Monetary Policy Committee (MPC) started its meeting on Tuesday, December 2, and will announce its decision on Friday, December 4. ALSO READ | Swamy Hits Out Again, Asks PM To Put The ‘Corrupt’ Merger Of LVB With DBS On Hold
A majority of the economists don’t expect RBI to further cut the repo rate, currently at a historic low of 4% since May, following a 115 basis point cut in rates since March, when the Covid crisis hit India. The reverse repo rate stands at 3.35%.
India’s GDP contracted by a lower than expected rate of 7.5% in the second quarter, after a 24% drop in the first quarter and better than RBI’s own assessment of an 8.6% contraction.
With better than expected news on the macro front, RBI is expected to revise its GDP forecast for the fiscal from -9.5% to -7 to -9% in this policy.
Inflation will be a significant cause for worry for the central bank as it hit a nearly six-and-a-half-year high of 7.61% in October, and RBI expects it to come down to sub 5% in the second half of FY2020.
The MPC will try to address the excess liquidity concern by absorbing some of the excess liquidity by way of increasing the cash reserve ratio (CRR), which was cut by 1% in March and was supposed to be rolled back only in March 2021.