There is room for the RBI to deliver one more rate cut in June – ANZ
Rini Sen and Sanjay Mathur from the Australia and New Zealand Banking Group (ANZ) cite the latest pick-up in consumption and activity indicators from India to anticipate a constrained recovery. The duo also expects a rate cut by the Reserve Bank of India (RBI) but cites the government’s fiscal limitations as the barrier.
The pick-up in consumption indicators, which we highlighted last month, has now expanded to some activity indicators.
While noteworthy, we do not envisage a robust recovery in the near term. Financial sector problems and excess capacity preclude a strong rebound.
There is room for the RBI to deliver one more rate cut in June, but fiscal space is limited.
To minimize slippage, government spending is likely to be less than budgeted, thereby becoming another headwind to growth.