RBI to remain cautious again..
Reserve Bank of India Monetary Policy Committee meeting is scheduled on Wednesday 8 December. It is likely to keep same the key interest rates but also it is expected to rise Repo Rate i.e. the rate at which it lends money to commercial banks.
Major Points to Consider
Inflation at 4-4.5 % which is very well under control
GDP growth at 8.4 per cent
Omicron effects
Considering GDP Growth rate and Inflation expectation’s the Indian economy seems to be very well positioned and on track of recovery after pandemic which has started in March-April 2020. However individual sector wise data is different. Agriculture, Mining and Public relations have seen growth compared with Q2 of 2019-20 but manufacturing, construction sector growth has been stagnated. Short supply of raw material being the major reason for the low growth of these sectors. Hotels, Transport and Communication have seen some green shoots and have shown marginal growth. After getting the registration rates back to 6% real estate transactions have slowed down and also this sector is feeling the heat of rise in cost of raw material like steel, cement and labor cost as well.
Taking all these clues, RBI Monetary Policy to remain cautious from inflation point of view and may have hawkish tone. On the other hand, new covid variant named Omicron has taken raise its head in India as well as there are around 8 cases found. RBI also in a worry after its future implications regarding the curbs on the businesses and thus would continue its support to economy by keeping rates low despite the concerns of price spiral in some sectors.
With the corrections in Stock markets globally the signs of low growth due to short supply of raw material, low interest rates resulting in inflation of goods and new curbs in movement in consideration of new virus variant Omicron.
Reserve Bank of India is likely to keep benchmark rates unchanged in its upcoming monetary policy and will rather wait for a better time to control the rate of interest rate to contain the inflation without sacrificing the growth rate as done in its last monetary meeting held in the month of October. We expect the RBI could hike the repo rate now or in the month of February and thus starting to come back to normal.
Central banks across the world are keeping a close eye on the inflation and growth and thus trying to gauge the easy monetary policy and Omicron fears has added to the worry for their decisions.
Real Estate Market experts expecting a rise in rates next year
Property consultant are seeing a marginal rise in interest rates next year in February to keep the tab on inflation. Property prices are at new high and there have been many newer launches by the majority of the builders and to contain the inflation next year rise in interest rates is expected.
Standstill economy and low consumer confidence
Last year’s revision in the salaries of the employees still remain in the minds and therefore in the market they has been observed of being reluctant of purchasing new high value goods. And now again the fear of Omicron is again making them cautious to postpone their buying decisions.
This has further resulted to keep RBI to keep its tatus quo on the interest rates and to closely all the aspects before taking any concrete decision.