The Reserve Bank of India (RBI) may adopt an accommodative stance in the next fiscal, and may cut rates by 25-50 basis points, if conditions permit the central bank, according to India Ratings (Ind-Ra).
“Although by calling the 50 bps repo rate cut, in its fourth bi-monthly review on September 29, 2015, a frontloaded policy action, RBI has nearly shut the door on further rate cuts in FY16, RBI’s policy stance is likely to be accommodative in the near term. If conditions permit, Ind-Ra expects a 25-50 bps cut in the repo rate during FY17,” Ind-Ra said.
The inflationary challenge is still not over. Ind-Ra expects average wholesale price index (WPI) to rise by 2.7 per cent and Consumer price index (CPI) to rise by an average of 4.9 per cent in FY17. Notwithstanding the benign retail and wholesale price forecast for FY17, Ind-Ra believes the inflationary challenge is far from over as food prices have more than often triggered surprises, the agency added.