Mumbai: The Monetary Policy Committee (MPC) of the Reserve Bank of India can cut the repo rate by 5 percent in its three -day monetary policy review meeting starting on Monday amid the Global Tariff War. The current full year is expected to fall by up to one percent.
A banker said that the tariff war launched by the US is in danger of impacting the economic growth of most of the countries of the world, including India and in such a situation the Reserve Bank of India can further cut interest rates to support the country’s industries and economy.
In its meeting held in February, the Reserve Bank of India (RBI) cut the repo rate by 5 percent, which was the first cut in five years.
A banker hoped that now while inflation has reduced domestically, the Reserve Bank will cut repo rate keeping in mind the possibility of recession in economic growth. Retail inflation is currently close to the Reserve Bank’s target of four percent.
The tariff war is expected to fall India’s economic growth by half a percent.
Various global financial institutions like Nomura, UBS and Goldman Sachs are speculating that the Reserve Bank will cut the repo rate of up to one percent in the current financial year.
The US has proposed to impose 26% mutual tariff i.e. equal import duty on some products coming from India, which will be applicable from 9 April. This is more than the tax market expectations. However, this tax is less than in some Asian countries, which can provide some relief to India.
According to a report by State Bank of India, the US has imposed more import duty on many other countries. In such a situation, the chances of dumping cheap products from those countries may increase in India. This may reduce inflation in India to some extent.
A UBS report stated that after a cut of 25 basis points in February, the repo rate in the current cycle is likely to be further deducted by 50 basis points.
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