The meeting of the six-member Monetary Policy Committee (MPC) to decide on the first bi-monthly policy statement for 2019-20 will be held from April 2 to 4. The policy will be announced on April 4.

The bi-monthly policy assumes significance as it will be announced just a week before the commencement of the seven-phase general elections beginning April 11.

While the RBI cut the interest rate in its February monetary policy after a gap of 18 months, the industry has started clamouring for another rate cut as retail inflation is below the RBI's benchmark of four percent and need for boosting growth is pressing.

CNBC TV18's Citizens MPC comprising of Pronab Sen, former adviser of the Planning Commission; Sonal Varma, managing director & chief India economist at Nomura Financial Advisory and Securities; Soumya Kanti Ghosh, group chief economic Adviser, SBI; Sajjid Chinoy, chief economist India, JPMorgan and Samiran Chakraborty, chief economist at Citigroup, discuss the upcoming meeting.

A majority of the economists in CNBC-TV18's Citizen's MPC voted 4-1 in favour of a rate cut ahead of the RBI's rate decision next week.

On Rate Hike:

The CNBC-TV18 Citizens Monetary Policy Committee voted 4:1 in the value of a rate cut. Economists Samiran, Soumyo, Sonal and Sajjid voted for a cut, while chairman of the committee Sen voted for the rate to be on hold.

All the members said there will be a 50 bps cut in 2019, including the one in April.

One basis point is a hundredth of a percentage point.

On RBI's Stance:

On the stance, two members - Sen and Sajjid - wanted it to remain neutral, Soumyo Ghosh of SBI wanted the stance to shift to accommodative and the remaining two - Sonal and Samiran- also thought it is possible the stance will change to accommodative.

Ghosh said, "In terms of the stance, I think given the current growth condition, given the fact that growth is going to remain weak for the next couple of quarters, I think you need to cut rates given that you have to do the heavy lifting to the monetary policy and possibly one rate cut will not suffice, possibly a larger rate cut will suffice. However, the issue is whether you need to cut more than 25 at one go or you want to spread it over. Anyway, even if you want to cut it by larger than 25 bps, you need to change your stance or even if you want to cut by 25 bps, you have to give a clear signal to the market that we are here for a dovish policy. So in that case also, I think there is a strong case for changing the stance from neutral to accommodative.”

“The MPC made clear that the focus of monetary policy will be consistent with the legislated mandate. That is, If if inflation is below four percent, then the MPC has some space to ease monetary policy. We are seeing that there is a huge divergence between food inflation and core inflation and that divergence continues to sustain in the latest print core inflation actually accelerated to almost six percent, but food inflation remains very benign. Over the next six months, we think inflation at a headline level remains very benign. Our average inflation forecast for the next six months is just about three percent. So to the extent that is the outlook and the MPC is focused on headline target. There is perhaps space for one more cut and so we expect the MPC will cut rates in April," Chinoy said.

“The MPC needs to think about that whether we can operate with as long as the 12-month horizon on inflation forecast or we should be looking at some kind of putting more weightage to near-term forecast and less weight towards the longer term forecast. So that sort of thing could drive a bit more dovishness into the MPC thought process," Chakraborty said.

First Published:Mar 28, 2019 7:45 PM IST