As the global economy has continued to grapple with growth issues, central banks all across the world have been looking to cut rates in order to stimulate the economy. The European Central Bank and the United States Federal Reserve are both expected to cut rates this month, as investors grow more anxious over an uncertain investment climate. However, among the many central banks in the world, the Indian central bank, the Reserve Bank of India, has proven to be consistently dovish over the course of this year so far.
In its previous three meetings, the RBI had cut rates in each of them and according to a Reuters poll; another rate cut seems to be in order after the latest meeting. A total of 66 economists participated in the poll conducted by Reuters this month between 17-24 July, and 80% of them indicated that the RBI is going to cut rates by 25 basis points. The meeting is going to take place on the 7th of August. It is important to note that after growing at a highly impressive rate for more than a decade, India’s growth rate has slumped, and the bank is now looking for ways to re-energize the economy. The rate cuts for the fourth consecutive time would make the RBI the most dovish central bank in Asia at the moment. More alarmingly for the Indian economy, the RBI last made these many rate cuts at the height of the financial crises more than a decade ago. Economist also believes that the rate cuts from the RBI are going to continue after August as well, as India grapples with growth pains and weakening inflation. Despite the fact that the RBI is going to go for another rate cut, the forecasts with regards to India’s growth has remained muted among experts. An economist at ANZ, who focuses on India, stated, “India’s economy continues to show weak growth momentum. We believe that while recovery is nascent, maturity is still a far way off.” These are not the best times for the Indian economy, and the RBI’s stance is a clear indication of that sentiment.