New Delhi: India’s headline CPI inflation could increase to 4.5–4.8%, while the RBI is expected to keep interest rates unchanged in its April policy with a cautious outlook.
Yes Bank’s report predicts a moderation in GDP growth to approximately 7 percent, with potential downside risks if the US-Iran war continues.
“Growth has remained resilient so far, supported by domestic demand – both private consumption demand and the government’s capital expenditure,” the bank said.
Inflationary risks stem from higher input costs for manufacturers and a possible El Niño that could push up food prices, and higher fertiliser costs if passed on to farmers.
Further, a prolonged crisis may also force the government to increase retail prices of petrol and diesel, the bank warned.
“RBI can remain on a pause to support growth, as inflation will not threaten the 6 per cent barrier and will mostly be supply-driven. Generally, a supply shock to inflation can be seen through if the HH inflation expectations do not rise significantly,” the bank said.
Due to heightened uncertainty, the bank said, “There is no burning hurry for the RBI to move to tighten monetary policy, also as USD/INR appears to be now settling into a narrow range.”
The report said that the rate-cutting cycle is over as inflation trends higher, INR depreciation pressure bites, and global central banks signal caution on inflation and rate cycles.
“However, a rate hike is also not imminent, as India stepped into the current crisis from an advantageous position of low inflation-high growth,” it added.
Fiscal policy has stepped in to share the burden by absorbing some of the oil price impact and keeping retail prices of petrol and diesel unchanged.
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AI image/IANS
—IANS
