To spur growth which fell to a three-year low of 5.7 per cent in the June quarter, the government is expecting a helping hand from the Reserve Bank of India (RBI) in the form of interest rate cut in the monetary policy review today.
The fourth bi-monthly monetary policy statement for 2017-18, to be released today, is being keenly awaited by all stakeholders -- especially the industry which has been demanding for lower interest rates.
Experts and industry bodies too have made a strong case for lowering of the key interest rate in view of subdued inflation and the urgency to propel economic growth which appears to be reeling under the impact of demonetisation and GST implementation.
However, bankers are of the view that the RBI would maintain status quo as inflation has seen an increase.
According to a SBI report, the RBI is likely to maintain status quo on key lending rate in policy review as it is "stuck in a conundrum" of low growth, mild inflation and global uncertainties.
"We expect the RBI to stay on hold at the upcoming meeting as rising incoming inflation and projections of further acceleration in inflation ahead will mean that there would be limited space for further easing," Morgan Stanley said in the research note.
A top finance ministry official said last week that there is scope for an RBI rate cut at the next policy review as retail inflation continues to be low. "There is scope for monetary easing because of inflation projections," the official had said, adding that all the government analysis is made on the basis of inflation remaining under 4 per cent in the medium term.
In its last policy review in August, the RBI reduced the repo rate by 0.25 per cent to 6 per cent in August, citing reduction in inflation risks.
- With agency inputs
