A raft of changes in the past three months globally could weigh heavily on the decisions of the Reserve Bank of India as it prepares to meet for the fast aproaching monetary policy committee meet for the next financial year.

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Global markets have experienced a lot of uncertainty because of tensions in US-China trade. Likewise, the US-India trade agreement also faces stress, with the US mounting a challenge against Indian export subsidies at the World Trade Organisation (WTO). The US argues that Indian subsidies are harming US companies by allowing New Delhi to sell its company goods cheaply.

These apart, a spike in oil prices and the cloud of angst that looms over the Indian banking sector are also major concerns for the next monetary policy.

Pronab Sen, former principal advisor at the erstwhile Planning Commission, shined a spotlight on the US economy. “The first question we need to ask is what is going to happen in the US. We know duties have been raised and have a cost push effect, inflation is going to inch up,” he said.

Earlier this month, The US Federal Reserve raised its key interest rate by 0.25% foreseeing two more hikes this year. This is most likely to influence the Indian policy decision.

Soumya Kanti Ghosh, group chief economic advisor, SBI, said the US Fed is looking at rate hike gradually and not at an exponential state. The rupee has been remarkably stable in the last few days which is a positive sign, he said.

Meanwhile, government think tank Niti Aayog (which replaced Planning Commision) is in talks with various state governments to ensure the implementation of minimum support price which is 50% higher than the cost of production.

There could be a possible risk on the government’s policy decision with respect to the minimum support prices, said Sonal Varma, Chief India Economist, Nomura. She further added that there still seemed to be ambiguity with respect to the cost measure that will be used and impact it could have on future inflation. “So, we will need to wait and watch on how this play out.”

First Published:Mar 29, 2018 8:16 AM IST