The six-member Monetary Policy Committee (MPC) headed by Reserve Bank of India Governor Shaktikanta Das will begin its three-day meeting from Tuesday as industry leaders demand that lending rate is cut by another 25 basis points to stimulate growth.
On February 7, the MPC had slashed the repo rate by 25 basis points to 6.25 per cent. It was the first time in 17 months the central bank had cut the rate at which it lends money to commercial banks.
A repo rate cut allows banks to reduce interest rates for consumers, and lowers equal monthly instalments on home loans, car loans and personal loans. A back-to-back cut in interest rate will provide relief to borrowers ahead of the general elections.
On Thursday (April 4), it will announce the decision on interest rate after wrapping up the first bi-monthly monetary policy of 2019-20.
Continued weakness in economic activity, benign inflation and soft global growth could be the factors for a rate cut. However, the RBI may continue with the existing rate as global crude oil prices are not in comfort zone.
Retail inflation in February was 2.57 per cent, which is below the RBI's benchmark of 4 per cent. Food inflation is expected to remain low due to excess production.
The manufacturing sector had pulled down growth in industrial production to 1.7 per cent in January from 7.5 per cent a year ago. Industry leaders say the low investment cycle warrants a rate cut in the upcoming policy.