NEW DELHI: Despite a slowdown in the overall price movement following a peak of 7.8% in April, Acuite Ratings noted in a note that the minutes of the RBI's Monetary Policy Committee meeting on August 22 show that inflation remains the MPC members' top concern.
From a policy standpoint, it is evidently necessary to frontload rate increases in coordination with international central banks, but the speed of the residual increase will also rely on the inflation readings over the coming several months. A measured drain of the money market core liquidity surplus is likely to occur in tandem with the rate action.
Chief Analytical Officer at Acuite Ratings & Research Suman Chowdhury said: "According to MPC minutes, a rate increase of another 50–60 basis points should be anticipated in the upcoming policy announcements, regardless of the reduction in the inflation trajectory. Given the growth in the services sector, it is unlikely that the Q2FY23 CPI inflation figure will fall to less than 6.0%. The fact that households' inflationary expectations are dropping is promising since it shows how effective monetary and fiscal policy initiatives have been thus far. This will also help to improve medium-term GDP prospects." On the growth front, all participants agreed that despite the slowdown in the global growth picture, India's economic recovery has remained largely robust.
The delegates agreed that India had fared better under the epidemic and Ukraine war shocks than many other economies. Future growth is anticipated to be sustained by the SW monsoon's recovery after some initial snags, a strong upturn in the sector of contact-intensive services, and substantial government spending.
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