The Reserve Bank of India (RBI) is expected to raise policy rates and banks' cash reserve requirements (CRR) by 25 basis points each before end-June, with the easing growth of concerns. However concerns about non-food inflation are rising according to a Macquarie report.
At least one of the rates may go up in the Reserve Bank of India's (RBI) quarterly policy review on 20 April, according to Rajeev Malik in his report.
"The RBI should adopt a double-barrelled approach, and hike policy rates and CRR each by 25 bps," he said. He added that even after the CRR hike, liquidity would be more than adequate to facilitate government borrowing as well as add to loan growth.
The central bank in January 2010, had hiked the cash reserve ratio (CRR) by 75 basis points before unexpectedly increasing key lending and borrowing rates by 25 basis points each on 19 March.
According to Macquarie's estimates, industrial output would likely have increased 16-17 per cent year-on-year in February even as the wholesale price index-based inflation for March was likely to be in the range of 10-11 per cent.
"We expect the IP details will reinforce that the growth momentum remains solid ... Food inflation will come off further, but non-food inflation is becoming a bigger worry," Malik said.
According to Macquarie projections GDP would grow in the January-March quarter around 8.5 per cent year-on-year, but said the monsoon season and international commodity prices would impact growth and inflation in a major way.