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The RBI turned hawkish in the last monetary policy review in February as inflation quickened and as the government relaxed its budget deficit goals. Photo: Reuters
The RBI turned hawkish in the last monetary policy review in February as inflation quickened and as the government relaxed its budget deficit goals. Photo: Reuters

RBI could turn more hawkish as growth quickens

The Narendra Modi government raised its growth forecast for the year through March 2018 to 6.6% on Wednesday from 6.5% in January

Manila: India’s central bank may become more vigilant on inflation as economic growth strengthens, increasing the risk of monetary tightening.

The government raised its growth forecast for the year through March 2018 to 6.6% on Wednesday from 6.5% in January. The economy expanded 7.2% last quarter from a year earlier, beating the 7% median estimate in a Bloomberg survey and the previous quarter’s 6.5%.

“The better-than-expected economic performance could lead the Reserve Bank of India to step up its anti-inflationary rhetoric," Prakash Sakpal, an economist at ING Groep NV in Singapore, said in a note after the data. “This, and the recent sell-off in the Indian rupee, could shift the consensus within the six-member RBI Monetary Policy Committee toward a rate hike."

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The RBI turned hawkish in the last monetary policy review in February as inflation quickened and as the government relaxed its budget deficit goals. It next meets to decide on interest rates in April.

“We expect the RBI to stay on hold through 2018, but risks are biased towards tightening, especially owing to government policies tilting towards raising food price inflation," Nomura Holdings Inc. analysts led by Sonal Varma said in a note.

Inflation accelerated from as low as 1.46% in June to 5.21% in December before easing slightly in January. The central bank’s goal is to keep headline inflation close to 4% over the medium term. Bloomberg

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