Reserve Bank of India apparently hawkish on growth outlook

NEW DELHI - The Reserve Bank of India (RBI) has released the minutes of a meeting held from June 4-6 with the overall tone apparently hawkish, says ANZ  Bank in a Client Note. Most members of the monetary policy committee (MPC) were confident that the ongoing growth recovery would be maintained.

“The members also acknowledged significant risks to inflation,” ANZ says.

“Some of the highlighted risks have either crystallised or have a high probability of materialising, in our view. Accordingly, we continue to expect the RBI to hike the repo rate by another 25bps at its August meeting.”

ANZ says the key takeaway from the minutes is a near -unanimous view among members on the durability of the economic recovery as well as growing inflation concerns.

“On the former, most members expressed confidence with the RBI’s estimate of 7.4% GDP growth for FY19. The MPC seemed confident of a strong revival in investment demand.

“However, some members expressed concerns that the recent increase in oil prices may impact disposable incomes and private consumption.

“The members noted that the strengthening of inflation reflects demand pressures, as confirmed in a narrowing of the output gap, improved capacity utilisation prints, and a pick-up in credit growth.

“The MPC also reiterated upside risks to inflation arising from: 1) an increase in global crude and commodity prices; 2) an imminent increase in agriculture support prices; 3) implementation of housing cost revisions by State governments; and (4) fiscal slippage.  www.live.anz.com (ATI).