The members of the Reserve Bank of India’s fifth bi-monthly monetary policy Committee began their three-day meeting today, and are expected to announce the outcome on Friday that is 4th December.The MPC is meeting at a time when the Indian economy is trying hard to come out of stagflation, i.e., a situation where the economy is experiencing a simultaneous increase in inflation and stagnation of economic output.
To recall, retail inflation stood at 7.61 per cent in October, the highest in six years (since May, 2014), and way above the upper bound of the tolerance range of 2-6 per cent. Besides, the economy shrank by 7.5 per cent in the September quarter of the current fiscal. While it’s true that the second quarter GDP numbers were better than consensus estimates, the growth scenario remains worrying. Unemployment, business sentiments and consumer confidence do not give the policymakers any encouraging signals.Technically, two consecutive quarters of contraction in growth mean a recession. Therefore, we are officially in the midst of a recession.
So, while the economic data show the economy is bouncing back sharper-than-expected albeit amid persistently high inflation, what would the RBI do in its Monetary Policy announcement? Will the December RBI Monetary policy be an eventful outcome for the markets?
Listen to the podcast to know what Devendra Pant, Chief economist at India Ratings; Aditi Nayar, Vice President and Principal Economist, Icra Ratings; Ambarish Baliga, an independent market analyst, have to say