The Reserve Bank of India may reduce the benchmark short-term lending rate by around 0.25 per cent in its annual monetary policy next month in the backdrop of declining inflation and to promote growth.
"Right now, the conditions should enable RBI to cut repo rate. We expect a cut of 25 basis points (or 0.25 per cent) in its policy in May and may be by another 25 bps in the next review," HDFC Bank Chief Economist, Mr. Abheek Barua said.
RBI Governor, Mr. D. Subbarao will announce the Monetary Policy Statement for financial year 2013-14 on May 3.
YES Bank Chief Economist, Mr. Shubhada Rao said that RBI may cut repo rate or the short-term lending rate by about 0.25 per cent in May as inflation has come down and there is a need to fuel economic growth.
"Taking cues from inflation, we believe that RBI could take this time...to cut rate, particularly, the way we have seen inflation in the past coming down. Given the strong deceleration in growth, we think RBI may cut repo rate by 0.25 per cent in May as well as may provide some liquidity easing," Mr. Rao said.
Wholesale Price Index-based inflation softened to 5.96 per cent in March after an annual rise of 6.84 per cent in February, the lowest rate since November 2011.
"If you look at the incremental data WPI, IIP in the last two months, that data is in favour of the 25 basis points rate cut. We are expecting a cut in repo rate in May," Mr. Anubhuti Sahay, Economist of Standard Chartered Bank said.
Industry has been looking for a rate cut to take care of problems concerning poor demand, low industrial output and subdued economic growth.