The Reserve Bank of India (RBI) last announced the schedule for the bi-monthly monetary policy committee meetings for the new fiscal. The first meeting will be held from April 3-5, while the next will start on June 5.
The MPC has been consistent in holding on to the elevated interest rates and has maintained the stance at the withdrawal of accommodation for many reviews now.
The recent cool-off in inflation, coupled with the need to support growth, has led to expectations of a change in stance to neutral and even a rate cut.
RBI MPC April 2024 Expectations: Experts’ Opinion
The RBI may again keep the key interest rate unchanged in April as it is likely to focus more on bringing down inflation to the 4 per cent target after concerns over economic growth abated with GDP growth estimated at nearly 8 per cent, said experts.
Also, the Reserve Bank’s rate-setting panel may take cues from the central banks of some major economies like the US and UK, which are apparently in wait-and-watch mode on interest rate cuts.
Switzerland has become the first major economy to cut interest rates, while Japan, the world’s third-largest economy, ended its eight-year period of negative interest rates regime.
The Reserve Bank last hiked the repo rate to 6.5 per cent in February 2023 and since then it has held the rate at the same level in its last six bi-monthly policies.
“Given that inflation is still in the 5 per cent range and there is a possibility of future shocks on the food inflation front, the MPC is expected to maintain the status quo on rate and stance this time,” said Madan Sabnavis, chief economist, Bank of Baroda.
He further said there can be a revision in the GDP forecast, which will be eagerly awaited.
“The growth in FY24 has been much better than expected, and hence, the central bank will have less concerns here and will continue focusing on targeting inflation,” Sabnavis added.
India posted 8.4 per cent economic growth in the December quarter of the fiscal 2023-24. The National Statistical Office (NSO) has revised GDP estimates for the first and second quarters of this fiscal to 8.2 and 8.1 per cent from 7.8 per cent and 7.6 per cent, respectively.
Aditi Nayar, chief economist, Icra, said the upward revision in the NSO’s GDP growth estimates for the first and second quarters of fiscal 2023-24, three successive quarters of 8 per cent plus GDP expansion and the CPI print of 5.1 per cent for February 2024, suggest status quo on rates and stance in the upcoming April meeting.
“Icra believes that the policy stance is unlikely to be changed before the August 2024 MPC review until there is visibility on the monsoon turnout as well as on the sustenance of the growth momentum and the US Fed’s rate decisions,” she said.
Consequently, the earliest rate cut is only likely in the October 2024 meeting unless growth posits a negative surprise in the intervening quarters, amid a shallow rate cut cycle limited to 50 bps at best, Nayar added.
Hitesh Jain, strategist, Yes Securities India, said, “RBI is seen sitting tight on interest rates at the April policy meeting, synchronising with the policy action of the major central banks. However, we fancy a possibility of a change in stance from “Withdrawal of liquidity” to “Neutral” given that core inflation has been consistently falling and well below 4%.”
“Recent LAF operations suggest that RBI is becoming comfortable with a neutral liquidity position, wherein the central bank has injected liquidity through various VRR auctions and in the process has mitigated the banking liquidity deficit emanating from the Advance Tax and GST outflows during the end of the FY2024.”
Jain added that a change in stance during April could be a precursor to a probable change in policy rates during June/August, in tandem with the policy communication from major central banks like the Fed, BoE and ECB.
Moreover, in a recent report, global rating agency Moody’s also said the Reserve Bank will likely keep rates on hold in the coming months given strong growth and firm inflation.
The government has mandated the RBI to ensure the consumer price index (CPI) based inflation remains at 4 per cent with a margin of 2 per cent on either side.
On March 25, RBI deputy governor Michael Debabrata Patra, in a keynote address at Nomura’s 40th Central Bankers Seminar in Kyoto (Japan), said inflation in India is moderating after surging on multiple and overlapping supply shocks from the pandemic, weather-induced food price spikes, supply chain disruptions and global commodity price pressures following the Russia-Ukraine conflict.
He also noted that inflation peaked early in response to coordinated monetary-fiscal policies to anchor inflation expectations and dissipate idiosyncratic food price pressures.
As a result, inflation has fallen back into the tolerance band since September 2023, with core inflation steadily ebbing to even below the target, Patra said.
RBI MPC Decision
The meeting of the Reserve Bank Governor Shaktikanta Das headed MPC is scheduled for April 3-5.
It will be the first bi-monthly monetary policy of fiscal 2024-25. A total of six MPC meetings are scheduled for the fiscal beginning April 1, 2024.
Typically, the six-member panel votes on a resolution on the third day of the meeting and the governor announces the decision in the first half of the day after the vote is completed. The decision will be announced on April 5 (Friday).
The first two days of the meeting are devoted to deliberations and presentations by subject matter experts to the panel.
The second bi-monthly policy review meeting will end on June 7. This will be followed by three-day meetings in August, October, December, and February.
The panel headed by the governor has three external members. It can be noted that Shaktikanta Das’ term as the RBI Governor is set to end in December this year.
Other members of MPC are Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Rajiv Ranjan, and Michael Debabrata Patra.
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