The RBI will cut repo rate by 25 bps during the monetary policy meeting in June 2019
Real Economy:The growth in the Index of Industrial Production (IIP) during Apr 2019 is expected to edge higher from Mar 2019 level largely owing to a low base. The subdued demand indicated by the high frequency indicators along with the distress in some of the sectors and uncertainty in global trade is expected to weigh on IIP. D&B expects Index of Industrial Production (IIP) to have grown by 2.0%-3.0% during Apr-19.
Price Scenario: While there are upside risks to inflation currently from the monsoon, the reversal in food prices and further rise in oil prices, we expect the headline inflation to be under 4% till Dec 2019, unless the monsoon brings about any major disruption. The strengthening of El Nino condition poses concerns to the inflation in food articles which are currently witnessing a reversal in trend. Nonetheless, subdued demand conditions places some restrain on the overall inflation rate. D&B expects the CPI inflation to be in the range of 2.8%-3.0% and WPI inflation to be in the range of 2.8% - 3.0% during May 19.
Money & Finance: Injection of liquidity in the banking system, FII outflows from the debt market, growing expectations of a rate cut and RBI’s focus on monetary policy transmission is expected to keep the yields restrained or at similar levels during May 2019 compared to Apr 2019. Further, central banks globally are moving from a tightening to a mild monetary easing cycle as concerns loom over economic activity and trade. We expect that the direction in the movement in prices will gain clarity by Aug 2019, post which the decision of a further rate cut might be initiated. D&B expects 15-91-day T-Bill yield to average at around 6.3%-6.4% and 10-year G-sec yield at around 7.4%-7.5% during May-19.
External Sector: Rupee faces depreciation pressures over FII outflows in May 2019, rise in crude oil prices and strengthening of US dollar. D&B expects the rupee to remain within the range of around 70.0-70.2 per US$ during May-19.