According to Japanese financial services major Nomura, the RBI is looking through the current low inflation prints and may keep policy rates unchanged in 2017.
According to the global financial services major, food prices are likely to fall on a good summer rabi harvest and this in turn is expected to bring CPI inflation down.
The RBI's Monetary Policy Committee (MPC), which has a mid-term inflation target of 4 percent, maintained its hawkish stance on inflation, with most members expressing concern over upside risks to core inflation.
That is a blow to the business models of most Indian IT companies which owe their existence largely to wage arbitrage. Thanks to cheaper local salaries, IT companies here were able to meet the technology needs of global firms at low costs. But the wage inflation in India has eroded that advantage.
Consumer price inflation is expected to have remained below the RBI's medium-term target of 4.0 percent for the sixth successive month due to lower base effects and a fall in the cost of pulses, cereals and perishable goods.
According to SBI Research's Ecowrap report, the easing of crude oil prices will have positive effect not only on inflation but also on GDP growth.
The Labor Department said on Wednesday that import prices jumped 0.5 percent last month after gaining 0.1 percent in March. It was the fifth straight monthly increase and beat economists' expectations for a 0.2 percent advance.
The differing interpretations of amendments to last year's RBI Act reflect sometimes strained relations between the market and the central bank, and are proving a test for Patel some eight months into his tenure.
The Food and Agriculture Organization's (FAO) food price index has been falling for five years due to ample supply, a slowing global economy and a strong U.S. dollar.
The Nikkei/IHS Markit Services Purchasing Managers' Index slumped to a three-month low of 50.2 in April from March's 51.5, only slightly above the 50-mark that separates growth from contraction.
The central bank slightly cut its inflation forecast for this fiscal year in a quarterly review of its projections, suggesting that it will maintain its massive monetary stimulus for the time being to achieve its ambitious 2 percent target.
D&B expects the CPI inflation to be in the range of 3.5- 3.7 per cent and WPI inflation to be 5.4-5.6 per cent during April this year. According to official data, retail prices jumped to a 5- month high of 3.81 per cent in March while WPI-based inflation slipped to 5.70 per cent in March.
The Reserve Bank of India had opted to leave the repo rate unchanged at 6.25 percent on April 6, and the minutes released on Thursday showed the six-member monetary policy committee had cited upside risks to inflation as the main reason for the decision.
According to the Japanese financial services major Nomura, all members expressed concern about stickiness in core inflation and believed that the disinflationary effect of demonetisation will be transient.
According to the global financial services major, rural demand is already reviving and the autumn kharif farm income has jumped by 26 per cent last year.
CPI covers the items specific to household consumption, WPI covers the goods of both household and industrial consumption.
According to SBI's research report Ecowrap, the Reserve Bank's inflation forecast of 4-4.5 per cent will be "materially undershot" as CPI inflation is unlikely to breach the 4 per cent mark till July this year.
The data compares with a 5.98 percent annual rise forecast by economists in a Reuters poll. In February, prices rose a provisional 6.55 percent, the fastest pace in two-and-a-half years.
According to the global financial services major, inflation risks are overdone and noted that food inflation is coming off while El Nino is a swing factor and commodity prices are likely to stabilise in 2017, reducing the pressure on imported inflation.
Having sunk to its lowest level for at least five years in January, consumer price inflation is expected to have risen to 3.98 percent last month from February's 3.65 percent, according to the median forecast of 30 economists.
Kuroda, speaking in the upper house of parliament, also said he felt the BOJ would be able to manage its exit smoothly, including reducing the size of its balance sheet.
A clutch of macro data points, start of the fourth quarter results season and geo-political dynamics post US missile attack on Syria will determine market movement this week, experts said.
"Further deviation of the already-high public-debt burden from the peer median, which may be caused by stalling fiscal consolidation or greater-than-expected deterioration in the banking sector's asset quality that would prompt large-scale sovereign financial support...(are) negative sensitivities," it said.