RBI likely to give higher priority to the growth recovery: Acuité Ratings & Research

Mr.Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on MPC Expectation June 2021

"Acuité believes that the current focus of the MPC is to support the fragile economy and the financial system from the damage inflicted by the second wave of Covid and to bring it back again on a healthy recovery path over the next few quarters. The latest GDP data released by NSO reinforces the economic revival that was set in motion in Q3 and Q4 of FY21 with the flattening of the first Covid wave; the pickup in industrial activity had led to a 6.9%YoY growth in manufacturing GVA of Q4FY21. Clearly, there is a need to pursue a similar monetary and fiscal policy framework over the next 2-3 quarters as we witness the tapering of the second Covid wave. Therefore, we expect the policy stance to remain unequivocally accommodative throughout the current financial year. While there is virtually no scope for a further cut in interest rates given the increased commodity prices and the rising WPI, the status quo on rates is likely to continue for a longer time possibly till the end of FY22. Despite the risks of a build up of inflationary pressures in the near term, RBI is likely to give higher priority to the concerns around growth recovery."

Source : Equity Bulls

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