Moneycontrol Pro Panorama | Monetary policy in the middle overs

While India’s interest rate policy direction will get some clarity tomorrow, the US Fed is also slated to meet next week.

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of. 
The World Bank expects global GDP growth to slow down to 2.1 percent in 2023 lower than the 3.1 percent figure of 2022, before rebounding a bit to 2.4 percent in 2024. Still, the Bank’s 2023 forecast is an improvement over its January one, indicating an improved outlook. That leaves open the possibility for further upward revision if the world economy shows more resilience.

What about India? The slightly unfavourable development here is that India’s GDP growth for 2023-24 has been revised down to 6.3 percent, from 6.6 percent in the earlier forecast. But 2024-25 and 2025-26 are both expected to see slight but improving growth. Before you express disappointment at the lowered GDP forecast, remember that growth in 2022-23 was at a healthy 7.2 percent.

The important point to note is that it’s the fastest growing large economy in the world, as Manas Chakravarty points out in today’s edition, and of the 2.1 percentage points of growth expected this year, India will contribute 0.2 percentage points, as much as the US and more than the Eurozone. China, of course, steals the spotlight by contributing to nearly half the growth, but then it’s bouncing back after a lockdown-induced low growth year, so a low base effect gets part credit.

The growth revision for India could give the RBI’s Monetary Policy Committee a supporting data point on keeping rates on pause. But the answers to a number of questions combine to determine the thinking on the future course of monetary policy. We put a number of these questions to Rahul Bajoria of Barclays to give you a picture of what to expect. In his view, PMI data may be strong but it has an urban bias, consumption in the economy is showing resilience, near-term inflation levels seem comfortable, weather could prove to be a risk to the supply-side and to know his full answers on these and more questions, and on the future trajectory of interest rates, do read the interview.

While India’s policy direction will get some clarity tomorrow, the US Fed is also slated to meet next week. A pause is what the market is expecting, but there is some toning down of expectations of cuts on the horizon. Ajay Bagga writes on what the Fed is likely to do, in today’s edition, “We think recent data supports a Fed pause at the June meeting, as it waits to see which way the labour market data moves in the near future to determine if it’s a normalisation back to 2019 levels or if it’s a bigger slowdown in the making. However, the Fed will be at pains in June to emphasise that sometimes a pause is just a pause.”

Lastly, our Chart of the Day shows real sales growth, adjusted for inflation that is, crawled in the March quarter and has been declining for some quarters now. Do expectations of low inflation mean a risk for reported sales growth?

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Technical Picks: RCF, Rossel India, Zinc, FACT and ACC (These are published every trading day before markets open and can be read on the app).

Ravi AnanthanarayananMoneycontrol Pro