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The Reserve Bank of India (RBI) is likely to hike its policy rate by another 25 basis points in its December policy meeting if inflation remains at the current stubborn levels, say economists and industry representatives.
Tuesday’s policy statement from the central bank clearly focused on “inflation management” and emphasised the need to reduce inflation to “foster macro-economic stability.”
Given RBI’s focus on inflation, repo rate is expected to be hiked by another 25 basis points at the next policy meeting, Samiran Chakrabarty, Head of Regional Research, South Asia, Standard Chartered Bank, said in a note.
P. H. Ravikumar, Managing Director, Capri Global Capital Ltd, said the ball was squarely in the Government’s court in finding ways to attract international money in the form of foreign direct investment (FDI) to improve capital formation.
“There has been clarity of FDI and taxation in recent weeks. This should augur well for capital flows into India. But local capital (from domestic industry) is unlikely to come by to increase the capex. The Government will will have to take care of this,” Ravikumar told Business Line.
He said RBI had sought to achieve a “meaningful balance” between inflation control and boosting economic growth.
Welcoming the RBI’s policy announcement, Anis Chakravarty, Senior Director in Deloitte India, said anchoring inflation was clearly the central bank’s priority. On the policy announcement, Chakravarty said there seemed to be a general recognition that global conditions had softened and RBI was passing on the benefit.
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