Monetary policy to adopt in the face of volatility (IANS survey)

“We estimate that average CPI inflation should moderate to 5.2% in FY2022 from 6.2% in FY2021. Nonetheless, it will remain well above the point. median of the MPC’s renewed medium-term target range of 2-6%, ruling out the possibility of further rate cuts to support economic activity and sentiment, “ICRA’s chief economist told IANS, Aditi Nayar.

“However, with the economic outlook remaining uncertain in light of the continuing pandemic, we expect the monetary policy stance to remain accommodative for much of 2021, until vaccine coverage improves significantly. . “

Currently, India is suffering from a massive spike in Covid-19 infections.

The latest peak brought in a record number of patients, hampering the ability of health care infrastructure to cope with the outbreak.

As a result, the situation forced state governments to implement local closures and travel restrictions which began to slow economic activity.

“In the midst of a severe second wave epidemic, growth-inflation dynamics worsened and inflation risk worsened more than growth,” said Soumyajit Niyogi, associate director of India Ratings & Research.

“Wholesale inflation, which had been subdued for nearly a decade, has now become volatile due to lasting factors such as global commodity prices. Against this background, no possibility of a rate change or normalization of The policy direction is not widely expected in this policy, but explicit communication in line with the inflation targeting framework is warranted. “

However, the country’s CPI-based inflation rose at a slower pace in April.

Nevertheless, the sharp downward correction in the consumer price index has been largely attributed to the favorable base effect due to the containment linked to the 2020 pandemic.

“We don’t see any change in the repo rate next week, even with a high risk of input and producer price inflation,” said Madhavi Arora, chief economist, Emkay Global Financial Services .

“Policy directions have become more open and state-based amid the new uncertainties and the changing nature of the economy, with the MPC saying the policy direction will remain accommodative” as long as necessary “until growth is recovering in a sustainable manner while ensuring that inflation remains within the flexible target. “

CPI-based inflation rose 4.29% year-on-year in April, from 5.52% in March.

Likewise, the consumer food price index rose at a rate of less than 2.02 percent last month, up from an increase of 4.87 percent in March.

According to Dun & Bradstreet’s chief global economist, Arun Singh, said the rise in inflation is largely linked to input prices and demand for inventory.

“Failure to fully pass price increases on to consumers in an environment of subdued demand could hurt corporate profit margins rather than retail prices. Since the economy is not yet fully open, rural areas are affected and the pace is uncertain. vaccination, the situation does not justify a change in rate at this stage. “

“The policy rate and position are expected to remain the status quo and accommodating until the end of the year.”

In addition, Suman Chowdhury, Director of Analysis, Acuite Ratings & Research, there is a need to pursue a similar monetary and fiscal policy framework over the next two or three quarters until the impact of the second wave of Covid fades.

“We expect the policy stance to remain unequivocally accommodating throughout the current fiscal year. Although there is virtually no opportunity to further cut interest rates given the rising commodity prices… the status quo on rates should continue for longer perhaps until the end of fiscal 22, “Chowdhury said.

“Despite the risks of a build-up of inflationary pressures in the near term, the RBI should give higher priority to concerns about resuming growth.”

(Rohit Vaid can be contacted at

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