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Informist, Monday, Dec. 9, 2024

 

NEW DELHI – Independent economic research company Capital Economics has advanced its India rate cut expectation to February from April after the government Monday named Revenue Secretary Sanjay Malhotra as the next Reserve Bank of India governor for three years from Wednesday. "The appointment of Mr Malhotra could set a new direction for the RBI," Shilan Shah, deputy chief emerging markets economist at Capital Economics said in a note.

 

"Admittedly, at this very early stage not much is known about his monetary policy views. But in comments last week, he did voice considerably more concern over the health of the economy than Mr Das did during Friday’s policy announcement," Shah said.

 

Shah noted that Das was the most hawkish member of the Monetary Policy Committee, which left the repo rate unchanged at 6.50% for the 11th consecutive meeting on Friday. In his policy announcement on Friday, Das said, "The recent spike in inflation highlights the continuing risks of multiple and overlapping shocks", and "strong foundations for high growth can be secured only with durable price stability". "With Mr Das leaving, the balance of views on the MPC is likely to be less hawkish," Shah said. 

 

Even after Friday's MPC meeting outcome, Capital Economics saw a rate cut only in April. However, after the announcement of Malhotra's appointment, Shah forecasts the first 25-basis-point rate cut to 6.25% at Malhotra’s first meeting in charge in February, or perhaps even in an unscheduled meeting before then.  

 

The MPC is next scheduled to meet on Feb. 5-7, days after the Union Budget for FY26 will be presented by Finance Minister Nirmala Sitharaman. Malhotra will be joined at the next meeting of the rate-setting panel by another new member as Deputy Governor Michael Patra's term ends in mid-January. The government has begun the process of looking for Patra's successor.  End

 

Reported by Shubham Rana

Edited by Deepshikha Bhardwaj

 

 

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