Two sets of data over the next seven days — industrial output growth for February and consolidated monthly inflation for March — would largely determine the Reserve
Bank of India’s (RBI’s) next move on interest rates. Analysts, however, expect the RBI to reduce lending rates moderately.
So, don’t expect EMIs on your existing home loans to come down in a hurry.
In a surprise move, the RBI slashed the cash reserve ratio (CRR) by 0.75 percentage points to 4.75%. CRR is the proportion of deposits banks have to park with the central bank. But it kept the repo rate — the rate at which banks borrow from the central bank — unchanged at 8.5%.Finance minister Pranab Mukherjee in his budget announcements last month had raised excise duty by two percentage points to 12% for most manufactured goods and brought more services under the tax net. Costlier manufactured goods such as cars and consumer durables are likely to push up inflation that has already begun climbing back.
A higher inflation, in turn, may prompt the RBI to maintain interest rates at high levels, a move that may squeeze households.
The government will announce the factory output growth figures on Thursday and release the wholesale prices-based inflation data for next Monday, a day before the RBI presents its annual monetary policy review.
“There was no action in the budget to deal with the suppressed inflation,” said Rajeev Malik, senior economist at broking and research firm CLSA. “Still, we maintain that a token rate cut will come through on April 17.”
WPI-based inflation, India’s most watched cost of living index, was at 6.95% in February after falling to a two-year low of 6.55% in the previous month. India’s factory output grew by 6.8% in January — the fastest in seven months —rekindling hopes of an industrial rebound buoyed by a robust manufacturing sector.