The Reserve Bank of India (RBI) governor, Shaktikanta Das announced the bi-monthly monetary policy statement on Friday at 10 AM. The meeting for this went on for three days, starting on Wednesday and it included the Monetary Policy Committee consisting of six members, or the rate-setting panel, of the Reserve Bank of India, that was headed by Shaktikanta Das.
Here are the four things that one should look out for:
Rate Action & Commentary
The Monetary Policy Committee (MPC) will probably be keeping the policy rates unchanged despite the possibility of a decline in inflation. Economists expect the MPC to be able to retain its accommodative stance for the financial year of 2021. However, the market is, divided over the timing of the hike of the next policy rate as some economists are expecting the RBI to raise the rates of interest only in the fiscal year of 2023.
Economic Growth
The Economic Survey and Budget of 2021-22 provides estimates for India’s economic growth, and the projections from the RBI for the coming fiscal year will also be closely observed. The RBI has estimated the real GDP growth to shrink by 7.5% in the fiscal year of 2021.
Inflation
The market expects the RBI to be warned against the impact of the government’s expansionary budget due to inflation. That being said, consumer price inflation was seen to ease to 4.59% in December. Inflation is supposed to remain at current levels over the next 6–12 months.
Liquidity
All attention will be focused on whether the RBI will announce a push-back of its ultra-loose liquidity support as a result of the government’s massive borrowing program. Last month, the central bank had reported that it will resume the normal liquidity operations after it drains out the excess liquidity and after it brings the overnight lending rates closer to the reverse repo rate.
