“In our pre-policy expectations of the RBI’s June 2022 Monetary Policy, we maintain that the worst is clearly behind us post the COVID 19 pandemic and India is once again on a high growth trajectory. However, there are heightened geopolitical dynamics in the wake of the Russia-Ukraine war, the high fuel prices, elevated logistics cost and interest cost, volatile capital flows and exchange rate volatility and the scramble for safe haven, and the attendant correction in asset prices. The emergence of newer variants of the pandemic and monkey-pox has also thrown a spanner in the Indian growth story.

On the basis of a close and careful analysis of the domestic and global scenario and the evolving growth-inflation trade-off, we expect that the RBI will change the stance of the monetary policy with a definite anchor on inflation. A rate hike in the June Policy is given because of the RBI Governor’s unequivocal assertion that a rate hike at the June 8 MPC meet is a “no brainer”. We expect the policy rate to go up by 35-50 bps. The RBI is, however, likely to continuously provide liquidity support through the LAF window to sustain the growth process. It would provide support to the government borrowing programme while controlling the hardening of yield through policy twists. A series of rate hikes in FY 23 would also help the RBI to move toward a positive real rate of interest.”