The Reserve Bank is likely to keep interest rates unchanged in its quarterly monetary policy as there is little pressure on the central bank to further take liquidity easing measures, according to Moody's.
"The Reserve Bank of India is facing little—if any—pressure...March quarter GDP numbers show that India’s economy remained on a solid footing, and subsequent high-frequency data such as industrial production point to a brighter outlook," Moody's economy.Com said in a release.
It further said that at the upcoming quarterly meeting on July 28, the apex bank is also likely to keep reserve requirement ratio unchanged.
"The current relatively loose monetary policy setting will complement the fiscal stimulus by ensuring sufficient liquidity for expansionary projects that are expected to gather steam later in the year. Monetary policy takes time to filter through to the economy," Moody's economy.Com, the research arm of Moody's, said.
It added that as commercial banks had accepted deposits at high fixed rates in the latter half of 2008, they had been reluctant to immediately lower lending rates to mirror the series of official rate cuts.
"However, as commercial banks gradually reprice these deposits as their terms expire, lending rates are expected to fall accordingly," it said.
Moody's further added that India’s stock market has witnessed a notable rise in net capital inflows, mainly due to improvement in the global investors' sentiment.
"The trend is likely to continue in the coming year, which will help to fund business expansion and strengthen the rupee," it said.