The GDP numbers for last year were as bad as expected but will they move the inflation-hunting RBI governor Raghuram Rajan to give a rate cut.
Rajan will formally roll out his red carpet for the new Modi government as he announces the Credit Policy on June 3. Expectations are that the governor may keep it simple this time.
Also Read: RBI rate decision key for shares
A CNBC-TV18 poll of bankers and economists show that 90 percent of bankers and economists expect RBI to keep repo rate unchanged at 8 percent and only 10 percent expect a 25 basis points cut. However, the market is divided over the future policy changes.
While 50 percent expect RBI to hold rates for the rest of the year, 20 percent see a hike and another 30 percent a rate cut before the year ends.
On growth, the Street is in consensus with RBI's FY15 guidance of 5-6 percent. Eighty percent of the bankers and economists expect GDP growth at 5-5.5 percent, while the remaining 20 percent see it between 5 percent and 6 percent.
On inflation, the market is in line with RBI's glide path of 8 percent by March 2015. Again, 80 percent of those polled see CPI inflation at 8 percent or below and the remaining 20 percent expect it to be above 8 percent.
While only 50 percent expect RBI to sound hawkish in the policy, the other half see the central bank to strike a neutral tone. But the market is all ears for any indication of RBI softening its hawkish stance and its position on inflation targeting.
V Srinivasan, ED, Axis Bank , said Budget will be the key event as it will show how exactly the new government is approaching the finances in the fiscal deficit situation.
"Clearly, I would think the externals sector situation is broadly under control. We need to see how the government looks at finances and because there is a question in terms of when the capex cycle is going to start, who is going to kick start it and what role will the government play. Post this, you can take a call in terms of exactly what will happen to interest rates," he said.
Srinivasan thinks interest rates will stay stable for the next quarter or so.
Soumya Kanti Ghosh, Chief Economic Advisor, SBI , doesn't see a softening in the policy rates this year.
"Our hope is RBI will very minutely watch movements in rainfall pattern. It has already indicated that CPI numbers could head down because of possibility from the base effect. That has been taken into consideration. If economic growth picks up, there are possibilities that there is a little softening of the rates at the mandi market. But as such we don't see a change in policy rates this year, " he said.
Jayesh Mehta, MD & Treasurer, BoFA-ML India, too doesn't expect much change from the April 1 policy.
"I think the governor's theme on inflation will remain, that's the priority at this juncture. Though we don't expect hawkishness or rate hikes. there is some probable built-in expectation that it might be a little bit more dovish than April 1. Maybe after Budget, the August 1 policy could be more dovish. The June policy will be a non-event," he added.
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