The Reserve Bank of India’s (RBI) monetary policy committee (MPC) is meeting in a backdrop where the global central bankers are worried about the banking crisis in the US and the world has already seen the Fed introducing some moderation in its hawkishness.

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CNBC-TV18's very own 'Citizen Monetary Policy' deliberated what the Shaktikanta Das-led team will likely do and more importantly what they should be contemplating.

Samiran Chakraborty, Chief Economist for India at Citi Bank, recently told CNBC-TV18 that he expects the Reserve Bank of India (RBI) to be reactive rather than proactive like its global peers.

“My sense is that going forward, monetary policy is going to be more reactive rather than proactive in a situation like this and we expect RBI to also follow the same pattern,” he said.

Chakraborty's comments come as India's economy continues to struggle. Inflation remains high, and the country is facing significant challenges when it comes to job creation and economic growth.

Sajjid Chinoy, Chief India Economist at Jpmorgan, believes that the RBI will not take comfort from the fact that core inflation will remain high.

“I think that the RBI won’t be able to take comfort from the fact that because of favorable base effects, headline CPI is dipping below 6 percent for the next few months if core is going to be in the 5.5-6 percent range,” he said.

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This suggests that the RBI may be more cautious when it comes to making changes to interest rates or other monetary policies.

At the same time, Sonal Varma, Managing Director and Chief Economist- India and Asia Ex-Japan at Nomura Financial Advisory and Securities (India), has warned that there is downside risk to India's gross domestic product (GDP) growth.

“The good scenario would be that the policy responses done so far curtail any further increase in financial stress which is our current baseline but there is a risk that as rates stay higher for longer and growth slows, we see more financial risk evolve,” she said.

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She expects a recession in the US and Europe, which could have a ripple effect on India's economy.

“Our base case is very much still a recession in the US but also in Europe. We are looking for a mildish kind of a recession but nevertheless, it is still very much a recession,” she added.

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(Edited by : Abhishek Jha)

First Published:Apr 5, 2023 12:19 PM IST