RBI likely to hold interest rate in June as growth recovery seen ahead: Nomura
New Delhi: GDP growth is expected to slow to 7.2 percent in January-March from 7.6 percent in the preceding quarter, but recovery is on the cards due to easier financial conditions, says a report.
According to Japanese financial services major Nomura, demonetisation effect is expected to slow GDP growth to 7.2 percent in the January-March quarter of this year (from a revised 7.6 percent in October-December 2016).
Nomura expects a recovery thereafter to an average of 7.5 percent in the second half of 2017 and 7.7 percent in 2018, supported by a release of pent-up consumption demand with remonetisation, easier financial conditions, pay hikes for government employees and modest external demand.
"Overall, our economic heat-map indicates that the overhang from demonetisation has largely ended. Cash-intensive rural demand is recovering and external demand remains a strong tailwind," the report said.
On the monetary policy front, Nomura said: "We expect the RBI to stay on hold at its 7 June policy meeting and maintain its neutral monetary policy stance. In our base case, we expect policy rates to stay on hold throughout 2017, followed by a cumulative 50 bps of rate hikes starting in April 2018."
In April, the RBI left key policy rate unchanged at 6.25 percent for the third review in a row citing upside risks to inflation. It had, however, increased the reverse repo rate -- which it pays to banks for parking funds with it -- by 0.25 percent to 6 percent, narrowing the policy rate corridor.
The report noted that notwithstanding the recent undershooting on inflation, the central bank is expected to remain cautious given the drop was largely driven by ongoing deflation in pulses and vegetable, which is transitory.
Moreover, uncertainties emanating from implementation of the Goods and Services Tax, monsoons and house rent allowance increases are also expected to weigh on inflation, it added.
Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.
The Indian central bank also clarified that all farm credit exposures, including from NBFCs, can be recast under the pandemic-related resolution framework issued in August, but loans to allied activities are excluded
Raghuram Rajan vs Sanjeev Sanyal: While India's unemployment time-bomb ticks, its adviser debates how long the fuse is
Unemployment is the big issue that the opposition Congress party is hitting hard on, especially after the pandemic-linked lockdown sent millions of migrant workers scrambling back home towards their native villages in an already slowing economy.
RBI Assistant 2019 Main Examination to be held on 22 November; for exam centre change, other details check rbi.org.in
The recruitment drive is carried out to fill 926 vacancies of Assistants in various offices of the RBI. Candidates who qualify the Mains examination will be called for a Language Proficiency Test