The May review may see the Repo Rate hitting a three year low, as the apex organization for monetary policies, the RBI, is expected to bring it down for third time in the year
The Reserve Bank of India realizes the need to support the various economic activities, so as to help them sustain in the current environment. The road to achieving financial solidarity and revive the growth rates of the economy, while keeping inflation levels under control, is one that requires great patience and farsighted vision. The recent developments though, have given the supreme monetary authority of India, the impetus to implement further rate cuts and ease the pressure on the economy.
Economists are confident of further reduction in the Repo rate in the policy review scheduled for May, because of the increased headroom for the Reserve Bank, on account of the reduced inflation levels. Inflation came down below 6 per cent for the first time in 3 years, which has helped the apex organization in its plans to incorporate a further cut in the repo rate, in line with the demands of the industry.
Even though the rate cut is extremely probable, it would be extremely naïve to think that the RBI would follow up with similar announcements in the future. The condition, even though has improved, is not in a state where the bank can let go of its cautious approach. While the wholesale inflation has dipped to manageable levels, the retail inflation has still not subsided sufficiently and the difference continues to be massive. Reduced gold prices, crude oil prices and the aforementioned factors, will lead the RBI into implementing a rate cut, but it may the last one for a while.