The Reserve Bank of India is likely to change its monetary policy stance to “neutral” from “calibrated tightening” on Thursday and move closer to a rate cut in April as inflation stays below the central bank's 4 percent target.
A softer stance would bode well for Prime Minister Narendra Modi's government, which wants to boost lending and lift growth as it faces elections by May.
The ruling Bharatiya Janata Party is already in an election mode. In its budget on Feb. 1, the government doled out cash to farmers and tax cuts to middle-class families, at the cost of a wider fiscal deficit and larger borrowing.
While two-thirds of 65 economists expected the RBI to hold the repo rate at 6.50 percent, most respondents predicted the six-member monetary policy committee (MPC) would shift its stance to neutral, according to a Reuters poll published on Jan. 24. Nearly half of respondents expected a 25 basis point rate cut by mid-2019.