1592899775_7Uxh1r_RBI_final.jpg 
RBI committee headed by Governor Shaktikanta Das has started deliberations on the benchmark interest rates on Wednesday and is scheduled to release its decision on April 8, 2022
Photo Credit :
Taking steps to control inflation will likely be a top agenda for the Reserve Bank of India (RBI) in its April monetary policy, amid the ongoing conflict between Ukraine and Russia which is affecting nations across the globe.
The Monetary Policy Committee (MPC) meeting which started today will conclude on Friday and will be followed by Governor Shaktikanta Das' monetary policy announcements.
"We expect the MPC to maintain the status quo on rates and stance for the upcoming policy given the downside risks to growth on the back of elevated commodity prices,'' said Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank.
Bhardwaj, however, believes that the room to ignore the rising price pressures has largely diminished and hence the MPC will have to revise upward its inflation trajectory and sound significantly cautious. We expect the MPC to provide hints on the likely exit policy beginning in June.
"Considering domestic growth is still in the early stages, the committee is likely to keep key policy rates unchanged in the upcoming monetary policy meeting. Even though the RBI is reiterating its commitment to supporting growth and easy liquidity, some revisions to inflation and growth forecasts can be expected. Rising inflation, although transitory and imported, will weigh on the growth in the coming months," said YS Chakravarti, MD and CEO, Shriram City Union Finance.
Chakravarti also said that the rising input prices and increasing crude and global commodity prices do not hint toward a smooth path and will likely delay spending and hit business and consumer sentiment. RBI needs to continue to support small businesses and MSMEs, which are just starting to emerge from the pandemic-led slowdown.
“The RBI MPC will have a tough choice in terms of weighing the still uneven domestic recovery and strong inflationary pressures which have intensified since the last policy meeting. While the RBI’s inflation forecast for FY2023 will need to be revised up, it is unlikely that they will react to it immediately," said Suvodeep Rakshit, Senior Economist, Kotak Institutional Equities.
Rakshit said that the RBI is likely to continue to signal its intent to support the government borrowing program though refrain from any explicit measures. For the April policy, we expect the RBI to start telegraphing its intent by being more concerned about the inflation outlook while keeping the stance and repo rate unchanged.
"The RBI monetary policy committee (MPC) meets this week, for the first time in FY23. CPI inflation has been sticky around 6 per cent YoY in Jan-Feb22, but RBI Governor Das had already signalled that the upturn was base effects-driven and thus will be looked through. The economic environment has notably changed since the February review, with a sharp rise in commodity prices, particularly oil, posing a threat to the inflationary outlook," said Radhika Rao, Senior Economist at DBS Group Research.
Rao added that evolving risks are likely to challenge the RBI’s sanguine view on FY23 inflation, prompting a 50-100bps upward revision in the CPI inflation forecast from the currently held 4.5 per cent.
"With the Russia-Ukraine conflict further causing disruptions, the RBI monetary policy would be an important event to be watched out for on Friday. Growth recovery is still uneven due to the ongoing geopolitical conflict, rising inflation, supply chain disruption, high crude oil prices, and the ongoing pandemic in certain parts of the world," said Umesh Revankar, Vice Chairman and MD, Shriram Transport Finance.
Revankar added that while the inflationary expectations have risen, downside risks to growth have emerged and hence, we expect the RBI to maintain an ‘accommodative’ stance as long as necessary and also to keep key policy rates unchanged in April policy. However, with the cumulative rise in the price of fuel, it would be important to watch if the RBI revises the inflation forecast higher.
Meanwhile, the committee headed by Das has started deliberations on the benchmark interest rates on Wednesday and is scheduled to release its decision on April 8, 2022.