First monetary policy review coming up this Tuesday

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Apurv Patel, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur

RBI is going to review the monetary policy for current fiscal year coming Tuesday. This will be the first bimonthly review of the current financial year and nothing out of ordinary is being expected to come out of this review.

Experts believe that repo rate will remain unchanged at 7.5 per cent. Vinod Nair, head of fundamental research at Geojit BNP Paribas Financial Services, said and I quote “Not expecting any rate cuts this time, not for another one or two months, it is very difficult this time with retail inflation increasing, the RBI would also like to look at the public sector banks’ distressed loans restructuring issues during the last quarter”. Meanwhile, industry chamber Ficci said on Sunday that any cut in interest rates would not be “adequate to stimulate investment in manufacturing” given the lack of “significant change in demand conditions”.

I believe a cut in repo rate is not in order at least for another two months especially considering the fact that we had one in the month of January earlier this year. However I think there is still a need to focus on ways to reduce inflation and the policy changes RBI comes up with for it are going to be very critical.



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