Updated December 27th, 2023 at 11:24 IST
Indian economy is in a state of uneasy calm, says QuantEco
Economic research firm also called for a prolonged pause on repo rate, until the first half of FY25.
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India is in a state of uneasy calm and RBI’s FY24 growth-inflation forecast of 7.0 per cent and 5.4 per cent suggests a Goldilocks scenario, QuantEco said in its report on Friday.
“Caution is warranted amidst heightened uncertainty (food inflation volatility, geopolitical spillovers, etc.) and the need to regain inflation fighting credibility in the post COVID phase,” the report stated.
Economic research firm also called for a prolonged pause on repo rate, until the first half of FY25. We note that there is no explicit relevant discussion by the MPC members on liquidity conditions. “This comes as relief as we believed that the earlier reference to OMO sales by the RBI was intended to serve as a surrogate for signalling caution amidst “rising crude oil prices, rising US yields and rising US dollar” thereby obviating the need for a direct/conventional monetary policy action,” QuantEco said in its report.
According to the report, with adverse global factors reversing over the last 1-2 months, pressure on INR has subsided. “This warrants a gradual organic withdrawal of liquidity surplus (that is underway) rather than actively deploying policy tools to do that,” the note read. As per the QuantEco, there now seems to be greater comfort on the projection of ‘within target-band’ inflation over the next 4- quarters.
“More importantly, the 4-quarter ahead inflation forecast (on average basis) has moderated to 5.0 per cent from 5.6 per cent in Oct-23, and currently stands at its lowest level since the MPC started tightening monetary policy in Apr-22,” it said.
Published December 22nd, 2023 at 21:47 IST