DH Poll: RBI likely to hold on to rates

DH Poll: RBI likely to hold on to rates

Reuters file photo.

The Reserve Bank of India (RBI) is likely to keep key policy rates unchanged in its February Monetary Policy Committee (MPC) meeting, that started on Tuesday.

The apex bank, which is holding its first MPC meeting under the new governor Shaktikanta Das, will announce the key rates on Thursday. 

According to a DH poll of economists, eight out of ten favoured no change in the policy rates as they felt the Budget presented by the finance minister Piyush Goyal on February 1 is inflationary in nature. However, two economists -- Prachi Mishra of Goldman Sachs and Nikhil Gupta of Motilal Oswal -- voted in favour of a rate cut. 

All the other economists, drawn from the public and private sector banks, policy makers, finance commission members, and rating agencies opined that the RBI will hold on to the existing rates.

However, all of them are of the opinion that the Reserve Bank might decide to change the stance from calibrated tightening to neutral.

Currently, the repo rate -- the rate at which the central bank lends money to commercial banks in the event of any shortfall of funds -- stands at 6.5%.

However, it might not suit the government's agenda, as they would want cheaper credit available in the market, in a buildup to the general elections of 2019.

"Given the slippage in fiscal consolidation, my take is that they will hold the rate, but the language will be dovish towards lowering it in the future," said Govinda Rao, member 14th Finance Commission.

The government, in its budget, revised the fiscal deficit -- the excess of expenditure over revenues -- target from 3.3% of GDP to 3.4% for 2018-19. Also, the government said that it doesn't expect the fiscal consolidation next fiscal. This will put inflationary pressure on the economy.