Adding: “This is also why GREED & fear is in complete agreement with the Modi Government’s criticism of the previous monetary policy regime, a point worth making this week given the noise generated by the resignation of one of the RBI’s deputy governors seemingly on the supposed issue of central bank independence!”
As regards economy, most investors are now looking up to the government's upcoming Budget in July to help revive the sagging economic growth. For the January – March quarter, the GDP came in at a dismal 5.8 per cent, sharply down from 6.6 per cent in the previous quarter, well below forecasts and the slowest in more than four years.
Most experts have now trimmed growth expectations. DBS, for instance, expects India's FY20 GDP at 6.8 per cent from 7 per cent projected earlier on weakening exports. Fitch, too, has cut its expectation to 6.6 per cent for the current fiscal from 6.8 per cent projected earlier on a slowdown in the manufacturing and agriculture sectors over the past year.
“Greater sensitivity to growth slowdown amid inflation comfort is likely to encourage the Monetary Policy Committee (MPC) to deliver yet another 25bp policy rate cut in the August policy meeting. Subsequently we expect the RBI to remain data-dependent and assess the transmission of the 100bp of cumulative rate cuts already delivered,” wrote Sonal Varma, managing director and chief India economist at Nomura in a co-authored report with Aurodeep Nandi.
Analysts at Bank of America Merrill Lynch led by Indranil Sen Gupta, their India economist also expect the RBI to slash rates by 50 bps by March 2020.