According to HSBC, India's current account deficit is expected to narrow from 1.1 percent of GDP in 2014 to 0.6 percent in 2015 while retail inflation is likely to remain below 6 percent throughout this year.
Finance Minister Arun Jaitley says steps taken by the government has kept food prices low and pro-active govt will always keep food prices low.
According to analysts, the mix of slowing inflation and weaker-than-expected growth are indicating that a policy rate cut is on the anvil. While a rate cut on or before June 2 is most likely, beyond that, room for additional rate cuts depend on structural reforms that the government undertakes.
Vivek Rajpal, rates strategist, Nomura India believes FIIs will make a come back only on good newsflow
Wholesale Price Index based inflation would possibly slide to a negative 2.7 percent or even lower. Before keeping the key policy rates constant in its last bi-monthly monetary policy in April, RBI in a surprise move had slashed the key repo rate twice by 25 bps each, to 7.50 percent.
According to the research report, after the June rate cut, the RBI is likely to hold on to the "pause" button for sometime and go for a further 50 basis points cut in early 2016.
The week started on a bullish note over better-than- expected Index of Industrial Production (IIP) data, leading the Sensex reclaiming 29,000-level.
According to CARE Ratings RBI is expected to hold its policy rate at the existing 7.5% in its next policy announcement in June ‘15.
Weaker growth and inflation below the RBI's goal of 6 percent by January 2016 would give the central bank room to ease policy further this year to spur activity.
While on-the-ground prices in March were contained and are not yet a significant cause for inflation concern, the past four episodes of unseasonal rain suggest that there are upside risks to food inflation, and therefore CPI inflation, in the next three months, Varma added.
The framework objective is to keep inflation below 6 percent and we will move to amend the RBI Act this year and provide for monetary policy committee," Finance Minister said while presenting the Budget for 2015-16.
Structural shifts in inflationary process are underway caused by lower oil prices and deceleration in agriculture prices and wages. "These are simultaneously being reflected in dramatically improved household inflation expectations.
Core inflation (non-food manufacturing inflation) is down to 0.9 percent, lower than December's figure of 1.5 percent. Clearly, the manufacturing sector is down if not out, and has significantly lower pricing power.
Consumer prices rose an annual 5.11 percent compared with a 4.28 percent gain in December, the statistics department said on Thursday after it changed the base year for measuring inflation to 2012 from 2010.
The median forecast from survey of 29 economists showed annual retail inflation running at 5.4 percent last month, faster than December's 5.0 percent but still below the RBI's target of 6 percent by next January and significantly slower than the 7.2 percent it averaged through 2014.
For 2015-16, CRISIL Research expects inflation to average at 5.8% supported by lower oil prices, normal monsoons, proactive steps by the government and better monetary and fiscal coordination. "Mild, yet positive surprise from inflation and IIP", says the report.
Wholesale price inflation was forecast to slow to 1.41 percent in November from 1.77 percent in October, making a new five-year low.
Delivering the key mote address at the Citi's Investor Summit, Jaitley hoped that as a professional organisation the Reserve Bank will take "the best decision".
"Assuming the present CPI targets are maintained, we expect the status quo on the rates to extend through March 2015 and perhaps significantly further into the year," Singapore brokerage DBS said in a report today.
According to CRISIL Research, for FY15, GDP is expected to grow by 5.5%, with industrial growth expected to rise to 3.6% from 0.4% in FY14.
The numbers come after the economy posted its fastest growth in 2-1/2 years in the quarter to June, helped by a revival in industry. Prime Minister Narendra Modi seized on that figure to highlight the "huge positive sentiment" behind India's recovery.
Retail inflation is expected at 7.8 percent this fiscal, in sync with RBI‘s indication earlier this year.
CNBC-TV18's Latha Venkatesh talks to Dr Pranob Sen, Chairman of the National Statistical Commission, Chetan Ahya MD & Chief Economist Asia Pacific at Morgan Stanley and A Prasanna, Chief Economist at ICICI Securities Primary Dealership Unit to find out their views on whether, even at 7.8 percent, the inflation battle is largely won.
"The year on year inflation measured by the monthly Consumer Price Index-Industrial Worker (CPI-IW) stood at 7.23 percent for July 2014 as compared to 6.49 percent for the previous month and 10.85 percent during the corresponding month of the previous year," a Labour Ministry statement said.
India's economy likely grew at its fastest in two years between April and June, according to a Reuters poll, as improved sentiment after Narendra Modi's election victory in the middle of the quarter coincided with a rebound in investment, manufacturing and construction.