Some analysts expect RBI to cut policy rate

The slowdown in economic growth and the government’s commitment to reign in fiscal deficit may prompt Reserve Bank of India (RBI) to cut policy repo rate by 25 basis points in its monetary policy review in mid-March, analysts expect.

The central bank may partly base its decision on the government’s efforts to deliver fiscal consolidation as exemplified by the progress in 2012-13 and presented in the Budget for 2013-14.

The RBI may also justify the rate cut with the easing in core inflation and the expectation that inflation will decline further during 2013.

But some analysts expect RBI not to cut repo rate in the forthcoming policy meeting. For example, a Nomura report said the brokerage expects the central bank to deliver next repo rate cut on May 3, not March 19.

Credit Suisse Director Robert Prior-Wandesforde had earlier said he expected the monetary authority to slash the repo or short-term lending rate on March 19.

Barclays India had also said a 25 bps cut in the repo rate was in the offing. It expects 25 bps repo rate cut as the seemingly better IIP print does not weaken the case for a March easing by the RBI, Barclays India Director and Chief Economist Siddhartha Sanyal said in a note.