Market analysts are expecting the Reserve Bank of India (RBI) to keep key policy rates unchanged at its impending monetary policy meeting scheduled for next week. Considering the high rate of inflation, the economy is expected to have entered a technical recession in September ended quarter.
Two successive quarters of contraction in gross domestic product or GDP growth is technically considered a recession. In a monthly bulletin article, an RBI official recently has said that India's GDP has likely contracted by 8.6 percent in the July-September period.
While official data is not out yet, for the April-June quarter, India's GDP contracted by a sharp 23.9 percent. This implies that if the economy has contracted in September ended quarter, India will have entered into a recession for the first time in history.
To support growth RBI ideally cuts rates to increase liquidity in the economy. Since the COVID-19 outbreak, the central bank has cut repo rates by 1.15% in total, taking the cumulative easing in lending rates since 2019 to a significant 2.50%. This would mean that the central bank will maintain its focus on controlling inflation.