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Contrasting Signals

The Reserve Bank of India will go for a rate cut for the third consecutive time in June.

Contrasting Signals

Going by the minutes of the monetary policy committee (MPC) meeting, along with latest industrial production data, it seems the Reserve Bank of India (RBI) will go for a rate cut for the third consecutive time in June.

MPC minutes clearly reiterated focus on growth, emphasised by Governor Shaktikanta Das. The industrial output - at a 20-month low in February - indicates slowdown in the economy.

GDP growth was 6.6 per cent in the December quarter, the slowest in five quarters. Economists expect a further dip in the March quarter. A surge in crude oil prices above $75 per barrel and a depreciating rupee could push inflation higher. CPI inflation rose to 2.86 per cent in March after hitting a low of 1.97 per cent in January.

Deputy Governor Viral Acharya and external member Anand Ghate had argued for a status quo in the last two meetings due to concerns around inflation. With the governor and the deputy governor having contradictory views, the June policy may throw up interesting trends.

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