RBI may cut estimate for growth; rate hike likely

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There is a consensus among analysts and economists that the Indian central bank will pare its projection for the economy’s growth in fiscal 2012 when it announces its second-quarter review of monetary policy on Tuesday, but not too many of them want the Reserve Bank of India (RBI) to raise its policy rate yet again, even though the wholesale price inflation continues to remain high, way beyond RBI’s comfort level.
The growth projection will probably be cut to 7.5% from 8%, and none, including Union finance minister Pranab Mukherjee, will be surprised by that. In fact, at the economic editors’ conference last week in Delhi, Mukherjee himself admitted that the growth projection outlined in the February budget would be difficult to achieve. There were also hints that the government will find it extremely challenging to meet the fiscal deficit target— 4.6% of gross domestic product.

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