NEW DELHI: In its next week’s policy review meet scheduled December 7, the Reserve Bank is expected to go for a 25bps repo rate cut, in view of downside risks to the economic growth, states a Citigroup report.
According to the global financial services major, there is a “risk of a sub-7 per cent GDP growth” this fiscal following lower-than-expected second quarter GDP print, adverse impact of demonetisation and fall in investments.
“The downside surprise in GDP, particularly the sustained fall in investment for three consecutive quarters strengthens the case for a 25 bps repo rate cut in the December policy,” Citigroup said.
India’s GDP accelerated to 7.3 per cent in the September quarter, pushed mainly by farm output, although the momentum may be hit in the coming months owing to demonetisation.
“We see downside risk to our baseline view of 7.2 per cent FY17 GDP growth as we keep a close watch on the evolving cash-supply dynamics post demonetisation,” it added.
Citigroup points out the cyclical and structural upturn evident till the second quarter of this fiscal has been temporarily punctuated by the demonetisation drive and thus opens up room for an accommodative monetary policy.
The Monetary Policy Committee headed by RBI Governor Urjit Patel in October had cut benchmark interest rates by 0.25% to 6.25%.