The markets are divided on whether the Reserve Bank of India will ease monetary policy in the forthcoming policy review, according to a survey by Royal Bank of Scotland (RBS).

The survey includes a total of 108 respondents from the bank’s corporate clients and other financial institutions.

“Half the market believes that the easing cycle will begin … the other half expects no change in the repo and reverse repo rates in this policy meeting,” according to the survey.

Inflation

The RBI has maintained that inflation will dictate its monetary policy stance. Inflation, based on wholesale price index (WPI), in September accelerated to 7.81 per cent, much above the central bank’s comfort level of 5 per cent.

RBI’s Deputy Governor H.R. Khan had said recently that monetary policy must act in sync with fiscal policy. The government, on its part, hiked the price on diesel and capped the number of cooking gas cylinders in a move to keep its fiscal deficit down.

The RBI cut the policy rates by half-a-percentage point to 8 per cent in April last. Subsequently, it slashed the statutory liquidity ratio by one percentage point to 23 per cent in July and the Cash Reserve Ratio (CRR) by 25 basis points to 4.50 per cent in September.

Industry has been lobbying for a rate cut as it believes that it will lift investment sentiment.

About 51 per cent of the respondents believe that there will be a pause in CRR cuts in the policy review meeting.

The RBI will unveil its quarterly monetary policy decision on October 30.

> satyanarayan.iyer@thehindu.co.in

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