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The Union Budget is done and now the Monetary Policy will be announced on February 8th. The US Federal Reserve is signaling disinflation has begun. How will this impact the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting.
The US Federal Reserve is signaling that disinflation has begun, but will this impact the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting? CNBC-TV18's Citizens Monetary Policy Committee which has Pronab Sen, Former Chief Statistician; Samiran Chakraborty, Chief Economist-India at Citi, Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India, Sonal Varma, MD and Chief Economist-India at Nomura Financial Advisory and Securities and Sajjid Chinoy of JPMorgan on board met to discuss whether or not the RBI should hike rates.
Samiran Chakraborty, Chief Economist-India at Citi, spoke to CNBC-TV18 about the current account deficit, particularly with regard to services and said that the RBI cannot overlook the macro and global issues that may still pose a threat to the economy.
He said, “We are now at 2.2 percent of current account deficit for next fiscal year. Now, 2.2 percent is still USD 85 billion of current account deficit and that means we require USD 85 billion of flow just to match the balance of payments, which in a year, if global dollar liquidity gets tightened, is not going to be an easy thing to do. So, my point is that the RBI cannot take its eyes off this issue.”
Sonal Varma, MD and Chief Economist-India at Nomura Financial Advisory and Securities, also weighed in on the current economic situation in India. She said that the decline in inflation numbers is a definite positive, but pointed out that the aggregate inflation basket is still very sticky. Despite this, she feels that signals suggest that there should be faster disinflation and that the goods component of inflation will also moderate. In her opinion, inflation is now less of an issue compared to December.
She said, “It (inflation) is less of an issue for sure, compared to back in December. The details are more mixed, but the forward looking indicators are also positive.”
For more details, watch the accompanying video