All eyes on Aug 4 RBI policy meet: Is another rate cut due?

The Governor of Reserve Bank of India, Raghuram Rajan, will stay put on rates on August 4th, say a 90 percent of respondents polled by CNBC-TV18.The man has always maintained that Reserve Bank of India's (RBI) rate cut decision is data dependent and with falling inflation, RBI indeed cut repo rate by 75 basis points to 7.25 percent from January through June 2015.But, this time given the uncertainty over monsoon and the hiccup in food prices in July, he will stay steady not just on repo but cash reserve ratio (CRR) and statutory liquidity ratio(SLR) as well. Barely 20 percent of respondents expect him to cut SLR by 50 basis points this time. SLR being the reserve requirement banks must keep with RBI in form of gold, cash or securities. Moreover, all eyes are keenly awaiting the Governor’s take on GDP and CPI forecasts. Amid evolving growth-inflation dynamics; and with the Wholesale Price Index (WPI)-based inflation that remained negative for the last eight months, a few respondents do expect to see change in that stance.Of all the respondents, 40 percent expect the RBI to lower its GDP forecast to below 7.8 percent while 60 percent said he wont touch the current forecast. On inflation, 20 percent expect CPI to lower from current 6 percent levels to between 5.5 and 5.9 percent, but a majority expects no change, as for the Govenor's tone, 60 percent of respondents expect it to remain neutral.However, 80 percent of the respondents said there is one more rate cut due from Rajan. This is likely to be post monsoon when he can be sure of situations regarding food prices. A 7 percent repo is most likely by the year end.