The Hike in the policy rates will be despite some moderation in IIP and slowdown in Investment growth as currently Inflation is the main concern for the Central Bank.
Headline Inflation remain at elevated levels and, above that the drivers of inflation have changed from cyclical food articles (vegetable, fruits etc.) to non-food manufacturing articles, reflecting demand pressures in the economy. Additionally commodity prices (esp. Oil) and non-food articles prices have also accelerated on account of external factors.
RBI is likely to raise repo and reverse repo rates by 25bps accompanied with a hawkish statement as Inflation concerns far outweigh the growth concerns.
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