The Reserve Bank of India appears poised for a tentative rate cut in April, an encore from February, as it balances external volatility, liquidity concerns, and financial stability. While the case for aggressive easing remains weak, the central bank may ease rates cautiously, with a sharper focus on injecting liquidity and ensuring better transmission rather than embarking on a full-fledged rate-cutting cycle, including the adoption of an accommodative stance.The State of the Economy article in the RBI’s latest bulletin underscores the challenges at play. A widening divergence in global monetary policy, persistent foreign portfolio outflows, and rupee depreciation pressures have complicated the rate-cut equation. At the same time, India’s economic resilience, improving consumption, and cooling headline inflation offer scope for continued calibrated easing.
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