RBI monetary policy: Citizen's MPC divided on reverse repo rate hike possibility on Feb 9

On GDP growth, Chakraborty said, “This is going to be one of the most complicated policy decisions for the MPC. The first challenge is a traditional growth inflation trade-off, where most likely the central bank will be revising down their GDP growth forecast, but at the same time, there will be upside risks to inflation, because of the higher oil prices etc.”

On inflation forecast, Chinoy said, “RBI will be caught in this bind where you are seeing services inflation go up, but you are not getting the anticipated goods disinflation. What does all this mean? There is a hump of inflation in the first four months where it will, between 5.50 or 6 percent, a lot of it is base effects. The RBI will see through that. My senses is we will be living in another year, where inflation settles around 5.50.”

On interest rate, Sen said, “My sense is that the interest rate at the moment is not the relevant measure that companies will be looking at. Just because the interest rate is low in the absence of sustained demand, nobody is going to invest. On the other hand, if there is an expectation of sustained demand, and if there is even relatively high-interest rate, companies may still actually go in for investments.”