By:- Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India
“The MPC pause on the rate and no change in stance is as per our expectations. A rate action was not warranted given that inflation is still within the targeted range. The RBI has lowered the growth projections and increased the inflation projections. These are understandable, but the important point is that the Governor has flagged significant downside risks to the 6.6% growth rate and 4.7% inflation projections. Clearly, the RBI is signalling that there are strong headwinds and is possibly landing the message in tranches that, in the event the Middle East conflict drags on, there would be a significant downside to growth. The inflation projection of 5.9% in Q3 is very close to the upper limit of 6% of the target band. If the inflation prints come in close to these projections and the upward risks continue, then the MPC could change its stance in the next meeting and press the rate increase button in its December meeting.”