The RBI is expected to make another rate cut in December according to a poll of economists who, however, said that the decrease may only have a marginal or no impact on the economy.
Despite the central bank making a total of 135 basis points of rate cuts this year to 5.15 per cent, inflation is still low. With an increase of 5 per cent, the economy grew at its slowest pace since 2013 in the April-June quarter and the poll by Reuters said it was expected to have grown by 4.7 per cent in the last quarter.
This would mark six consecutive quarters of slowing growth, which was last seen in 2012.
"Further rate cuts are likely to have a limited impact on the economy as the cost of borrowing is not the pressing issue. The lack of risk appetite and fragile sentiment is holding back fresh investment in the economy," said Sakshi Gupta, senior India economist at HDFC Bank, was quoted as saying by Reuters.
Recent surveys have also predicted that the economy won’t improve soon. 24 out of 56 economists said that the rate cuts would slightly improve the economy, while around 19 of them predicted little or no impact. The remaining economists said the rate cuts would stop growth from slowing further.
The poll predicted a repo rate cut for the sixth time in a row by 0.25 per cent to 4.90 per cent.
If the prediction turns out to be true, this would -- at 1.6 per cent in total -- be the most in a calendar year since 2009.