The Reserve Bank of India (RBI) is unlikely to cut interest rates at its bi-monthly monetary policy meeting scheduled at 11am today, says Economist Taimur Baig of Deutsche Bank.
But investors should look past the policy and focus on larger developments that have the potential to reform the banking system, he told CNBC-TV18.
"The question is not about whether the RBI has 25 or 50 basis points in its playbook," he said. "Investors are interested in knowing what's happening with financial restructuring of banks."
Baig was referring to steps that the central bank or the central government could announce to tackle the protracted troule of non-performing loans, to which effect they have already announced steps such as strategic debt restructuring or capital infusion to state banks.
"But there is skepticism in the market in terms of whether we are only kicking the can down the road or is there is a system in place to tackle the issue. [For instance] is the government thinking about setting up a bad bank that would separate [good and bad] assets? Or is this going to be a case multi-year restructuring?" he asked.
Unsurprisingly given his views, the economist is also circumspect in his growth outlook for the Indian economy. While most expect GDP growth to come in around 7.5 percent this year, he said output would likely grow in the "low 7s".