Don't see RBI rate cut or change in dovish tone: Economist

In an interview with CNBC-TV18, Indranil Pan, Chief Economist, IDFC, outlined his expectations from the Reserve Bank of India's bi-monthly monetary policy, which will be hosted tomorrow (February 2).Below is the verbatim transcript of Indranil Pan’s interview with Reema Tendulkar & Anuj Singhal on CNBC-TV18.Reema: Walk us through your expectations from the policy tomorrow?A: We are expecting no change either in the direct instrument or the indirect instrument which necessarily means to say we are not expecting the Reserve Bank of India (RBI) to cut rates nor actually do anything much in terms of the liquidity. The guidance factor would be -- as you pointed out -- more or less similar to the last policy where he would maintain a dovish tone, where he would keep the doors open but he would also very clearly signal his diligence on the achievement of the glide path of a 5 percent inflation target by 2017 January. So, that pretty much should be the policy course as of now. Having said that in terms of our expectations we do expect the RBI to actually sort of move by around a minimum of 25 and a max to max a 50 basis points in the next financial year and that is more specifically post to the Union Budget.Anuj: What will be the key set of statements to watch out for in policy tomorrow?A: The first type of commentary would be on the growth factors where he would continue to sort of maintain that growth is on the lower side. The International Monetary Fund (IMF) has also reduced the growth parameters for the world. One of the key issues that possibly needs to be highlighted or possibly would be highlighted by the Governor is on the macro stability front which could be very crucially sort of hinged on how inflation expectations need to be managed; how fiscal issues need to be managed. He has been talking significantly on the very fact that the government needs to stick to its fiscal consolidation path related to the debate that India is seeing at this point in time as to whether we should lean towards capital expenditure and therefore slip on fiscal or we should be sort of more clearly guided by the fiscal consolidation path and hence allude to the macro stability factors. The third issue of course is the inflation point of view where I think that he would be clearly guiding us towards risk of some jumps in the oil prices contingent on the supply cuts that are being talked about at this point in time. He would obviously be also talking about the global risk in terms of China and the volatility in the currency markets. So, that should be the broad sort of set of parameters that he would be looking at?Reema: Would the governor be retaining the word accommodative policy tomorrow?A: I guess so, yes, simply because of the fact that in my opinion we have more or less seen the peak of the inflation. So, whatever needs to be factored in from a reversal of the base effect we have seen? The pulses prices have not come down very significantly but they are on a slight downward trend. Vegetable prices are comfortable at this point in time. Yes, oil is once again slightly surprising on the higher side so that is a bit of a worry. Otherwise, I think there could be room opening up if we have a relatively good monsoon which is sort of the expectation at this point in time and which necessarily means that we can see a bit of cuts further down the line, so accommodative as a word can actually be maintained in the policy very clearly. (Copy edited by Nazim Khan, interview transcribed by Vrushali Sawant)