MUMBAI, May 31: With economic growth likely to
slow down in the March quarter 2019, the RBI may cut repo rate by 25 basis points in the upcoming monetary policy review, analysts say.
The growth data for the fourth quarter 2018-19 is to be
released Friday.
According to a DBS Group Research report, the economic growth is likely to moderate to 6.1 per cent, slowest in over seven quarters, from 6.6 per cent last year same period.
The gross value-added growth is likely to ease to 6 per
cent from 6.3 per cent in the previous quarter, it said.
The Reserve Bank will announce its second bi-monthly monetary policy for the current fiscal on June 6. This will be the first policy meet of the central bank after the Lok Sabha elections 2019.
“Close on the heels of the GDP outcome, the RBI policy
committee will decide on rates on June 6. We look for a
25 basis points cut in the repo rate to 5.75 per cent, taking
cumulative cuts in 2019 to 75 basis points,” the DBS Research report said.
In 2019, the RBI cut repo rate by 25 basis points
each in its February and April monetary policy reviews.
Earlier this week, SBI’s economic research department
in its report Ecowrap said it expects GDP growth for March quarter at 6.1 per cent and GVA growth at 6 per cent or slip
marginally below 6 per cent at 5.9 per cent.
It sees 2018-19 GDP growth at 6.9 per cent.
The report said due to the expected slowdown it
expects larger rate cut of 35-50 basis points by the RBI in
the forthcoming policy.
“RBI could use the rate change in non multiples of 25
basis points in June policy as a first step towards providing second generation signals to market of future policy stance,”
Ecowrap report said.
Kotak Mahindra Bank’s president (consumer banking),
Shanti Ekambaram said with the elections resulting in a
decisive mandate, the attention will now shift to policy –
both fiscal and monetary – with the key aim of spurring
growth, boosting the slowing consumption and attracting
private investment.
“One can expect both liquidity measures and a rate
cut. Rate cut expectation ranges from 25-50 bps,”
Ekambaram said.
She said the RBI will see how the fiscal situation unfolds
with the budget announcement and spending measures.
It will also take into account global factors, trade
tensions, crude price trends, geopolitical equations and the
monsoon outlook, she added.
Rating agency Icra however expects the monetary policy committee (MPC) to maintain a status quo on June 6 as it would adopt a wait and watch approach and look for the fiscal policies announcement during the Union Budget in July 2019.
MPC has already done consecutive rate cuts in its
previous policy meetings and the benefit of those cuts by way
of lower lending rates or improved credit growth are yet to
become visible, it added.
The agency said spurring up the domestic consumption
will remain an area of focus, and it expects RBI to address by
statements on improving the liquidity conditions.
“Such measures can improve the transmission of
previous policy cuts in lending rates of banks, rather than
another cut in repo rate, which may not necessarily result in
lower lending rates of banks and demand growth,” the rating
agency said. (PTI)
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