The Reserve Bank of India is to announce the mid-quarter monetary policy review today. The subsequent surge in policy rates has been making headlines since quite some time now. The review will thus affirm the anticipations of analysts and market players.
The depreciating value of Indian Rupee against U.S. Dollar and the slowdown in the economic growth are expected to have their impact on the review. Apart from that, inflation which has been on a rise since a long time continues to be a major hurdle for the nation as well as the central bank.
"The struggle against inflation and the tightening interest rate regime has contributed to lowering of growth in demand and investment. The slowdown in industrial growth is of particular concern as it impacts employment," said Finance Minister Mr. Pranab Mukherjee.
To tackle the rise in inflation, the umbrella banking body has been aggressively hiking the policy rates since March 2010.
A hot debate is still on if RBI will change its stance and will it lower the Cash Reserve Ratio (CRR). Some believe that it is highly unlikely as per now but can not be ruled out as a possibility in near future.
The Chief Economist at HDFC Bank, Mr. Abheek Barua said "With growth slowing more than expected and likelihood that headline inflation could cool to 7% by March, the central bank is likely to in a dovish rhetoric in its monetary stance, leaving door open for a possible CRR cut in January and a repo rate cut in first quarter of FY13."
The Chairman of State Bank of India, Mr. Pratip Chaudhuri expects that there should not be any hike in the interest rates. "I don't think so because food inflation has come down significantly and steadily. RBI has said 7% is the level they are targeting", he said.