Upside risks to inflation remain. Those emanate from the monsoon, rising commodity prices, especially of oil (Chart 3), fiscal slippage and higher MSPs for kharif crops. Further, as seen in Chart 4, household inflation expectations stay elevated.
On the growth front, there is reason to cheer. The second advance estimates showed that gross value added (GVA) grew by 6.7 per cent in Q3FY18, up from 5.6 per cent in Q1FY18, as the effects of demonetisation and the GST fade away. Gross fixed capital formation also grew by a healthy 12 per cent in Q3FY18 (Chart 5).
The MPC will also be mindful of the direction of the US Fed policy, which raised rates last week (Chart 6). The markets are expecting two more rate hikes by the Fed in 2018.
But even as the MPC has held rates so far, financial market conditions have tightened. As seen in Chart 7, the 10-year G-sec yield has soared. Though yields fell after the government announced its borrowing programme for 2018-19, they remain elevated. Banks are also hiking their term deposit rates, which is now gradually seeping into higher lending rates (Chart 8).
StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines. Compiled by BS Research Bureau