Mumbai (Maharashtra) [India], August 4 : The Reserve Bank of India (RBI) began its three-day Monetary Policy Committee (MPC) meeting on Monday in Mumbai, which will conclude on August 6.
The much-anticipated policy announcement will be made by RBI Governor Sanjay Malhotra at 10 AM on August 6, the final day of the meeting.
In exclusive conversations with ANI, several top economists shared their expectations and forecasts ahead of the policy decision.
Dipanwita Mazumdar, Economist at Bank of Baroda, told ANI that the RBI is expected to adopt a "wait and watch" approach in the upcoming meeting.
"For MPC, we expect a wait and watch approach as already significant frontloading has been done by RBI. Anecdotal evidence shows in an uncertain global policy space; a cautious data dependent move is more of a policy choice than any other haste move," she said.
Economists also pointed out that the US tariffs pose a potential downside risk to India's economic growth. Assuming a 10 per cent fall in the value of Indian exports to the US, the GDP could see an impact of around 0.2 per cent, they noted.
However, they also mentioned this as an opportunity for India to further integrate into global supply chains, particularly in South-East Asia, and improve export competitiveness in labour-intensive sectors.
Debopam Chaudhuri, Chief Economist at Piramal Group, told ANI that, "They (RBI) will maintain the rate at 5.5 per cent most likely. However, we can expect a rate cut of 25 basis points in October. The RBI may reconsider its policy stance in August though, and change it back to accommodative from neutral."
Meanwhile, banking and market expert Ajay Bagga had a slightly different view. He believes the RBI does have space for a rate cut in the upcoming meeting.
"Monetary space is there for the RBI to cut rates by 25 basis points in its August meeting. We expect a rate cut," Bagga told ANI. He also commented on the global monetary policy environment.
"The US Fed, as expected, held rates constant. However, the hawkish tone in the press conference by Chair Powell led to September rate cut probabilities falling to 41 per cent. The Bank of Japan has also held rates steady this morning," he noted.
The six-member MPC is headed by the Governor and comprises three officials from the RBI, along with three external members nominated by the Government of India.
The committee meets every two months to decide on key interest rates and set the tone for the country's monetary policy.
In the previous meeting held in June, the RBI took a surprising step by announcing a 50 basis points (bps) cut in the repo rate, bringing it down to 5.5 per cent.
Explaining the move, Governor Sanjay Malhotra had stated that the cut was driven by softening inflation, with both near-term and medium-term projections falling within the RBI's target range. He also noted that food inflation remained under control.
Adding an interesting layer to market expectations, at approximately 3:30pm on August 4, prediction market platform, Probo, assigned a 50 per cent probability to the macro event contract 'Will RBI cut the repo rate in the next monetary policy meeting?'
As the meeting progresses, all eyes remain on the final announcement on August 6 to gauge how the RBI navigates the complex interplay of domestic inflation trends, global economic headwinds, and evolving monetary policy landscapes.