Mr- Prashant Pimple, CIO Fixed Income at Baroda BNP Paribas Mutual Fund
“The West Asia war added an unexpected twist to India’s macro-outlook, highlighting our pain points as an economy dependent on external energy supplies. Elevated crude prices for long will have spillovers on domestic inflation and negative fiscally. Apart from that an uncertain growth environment is hurting growth through slower exports, pressure on currency and changing global flows. The current dynamics stemming out of external reasons are hurting both growth and inflation. We expect RBI to reflect a cautious tone on inflation but also be cognizant of growth dynamics in the country which have recently stabilised post GST rationalisation and monetary support. It is important to note that, domestic yields are already under pressure and closer to 2024 levels, when RBI was on a long pause and repo was at 6.5%, restrictive enough to contain inflation shocks. Therefore, we expect RBI to maintain the status quo on policy rates. We also expect RBI to reiterate its commitment to maintaining adequate liquidity to support the needs of the economy. However, the RBI will probably be strategic in its liquidity infusion measures given near term pressure on the currency. “
