In its upcoming monetary policy review, the Reserve Bank of India (RBI) is expected to maintain the status quo on the benchmark repo rate, keeping it steady at 6.5%. This anticipated decision comes amidst concerns over potential fiscal populism following a narrow win by Prime Minister Narendra Modi in the recent elections
Source:- news 18
The slim electoral victory raises fears of increased government spending and fiscal measures that could spur inflation. Given these circumstances, the RBI is likely to adopt a cautious approach, focusing on controlling inflation which remains above its target of 4%
Source:- BBC news
While the economy has shown robust growth, with GDP estimates revised upwards, the central bank is expected to continue its “withdrawal of accommodation” stance to manage inflation risks effectively . Additionally, any adjustments to the policy rate might be postponed until clearer signs emerge regarding the fiscal policies the government might adopt following the election
Overall, the RBI’s decision will likely reflect a balanced approach aimed at maintaining economic stability while being vigilant about inflation and potential fiscal expansions
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