The Reserve Bank of India (RBI) is expected to leave its benchmark Repo Rate and Cash Reserve Ratio (CRR) unchanged at 6.00 percent and 4.00 percent respectively with a neutral stance at its monetary policy meeting, scheduled to be held on April 5, aimed at striking a balance between bolstering economic growth and achieving the medium-term target for CPI inflation of 4 percent ± 2 percent, according to the latest report from Scotiabank.
India’s CPI inflation cooled further to a four-month low of 4.44 percent y/y in February from 5.07 percent the previous month. In our opinion, it could ease moderately starting from July on the back of the favorable base effect.
According to a report from Business Standard on Wednesday, the Indian government and the RBI are highly likely to announce an increase in FPI investment limits in G-securities before the end of this week.
The limits could be raised to 6-8 percent of outstanding bonds in phases over the next 2-5 years from the current 5 percent cap as a Bloomberg report showed earlier. As of March 27, FPIs have exhausted 94.23 percent of their INR1,913 billion investment limits in central government securities, while taking up only 17.57 percent of their limits in state development loans.
In the meantime, long-term FPIs have consumed 81.77 percent of the reserved INR651 billion cap in central government bonds, according to the NSDL.
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