The market equations have changed in the last two months and misplaced all the calculations that would have helped RBI to lay the path ahead for the future.
GDP and Inflation both took a nosedive and the softer prices and sluggish growth might push might prompt the central bank to budge, believe experts.
RBI’s CPI inflation projections given in October 2016 for March 2017 stood at 5.3%. However, after demonetisation, CPI inflation continued to fall to 3.4% by December 2016. RBI, then, lowered it's March 2017 inflation outlook to 5%.
The massive 110 basis points difference in RBI’s forecast and actual numbers is worrisome for the market.
Many economists believe that RBI has been overestimating price pressures. In its February MPC, RBI had changed its stance from ‘accommodative’ to ‘neutral’. Repo rate now stands at 6.25%.
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