INSUBCONTINENT EXCLUSIVE:
All 51 economists polled by Reuters expected the MPC to hold rates.The Reserve Bank of India will likely keep interest rates at record lows
this week as it assesses the economic fallout of the country's evolving COVID-19 crisis, but the monetary authority is expected to
reiterate its commitment on liquidity
The Reserve Bank of India's (RBI) monetary policy committee (MPC) will likely keep the key lending rate or the repo rate unchanged at 4
per cent for a sixth straight meeting when it announces its decision after a three-day meeting on Friday.All 51 economists polled by Reuters
expected the MPC to hold rates as Asia's third-largest economy grapples with various state lockdowns.The RBI has repeatedly said it will
ensure there is adequate rupee liquidity in the financial system to help the economy's productive sectors and the government's massive
borrowing program, and economists expected it to reiterate that message."The policy outcomes are no longer just a statement of rate action
but much more," said Anand Nevatia, fund manager at Trust Mutual Fund."While markets will be expecting reassurance on liquidity and awaiting
the quantum of GSAP (government securities acquisition programme) for next quarter, one should not be surprised if Governor (Shaktikanta)
Das announces yet another innovative tool," he added.RBI unveiled fresh measures in May to help lenders tide over mounting bad loans and
give some borrowers more time to repay their debts, as surging COVID-19 infections triggered strict lockdowns in several states.The RBI in
April committed to buying Rs 1 lakh crore ($13.71 billion) worth of government bonds from the market between April and May in a quantitative
easing program it called G-SAP 1.0.Traders will look to see whether the central bank will announce potentially more aggressive bond
purchases under a G-SAP 2.0 programme on Friday, and are also eyeing any revisions to growth and inflation forecasts.Market expectations for
larger bond-buying are high after the government recently increased its borrowing for this year.The government said last week it was going
to borrow an additional Rs 1.58 lakh crore, over and above its massive Rs 12.06 lakh crore scheduled borrowing for 2021-22, in order to
compensate state governments for a shortfall in tax revenues.India's annual economic growth rate picked up in January-March compared with
the previous three months, but economists are increasingly pessimistic about the June quarter after a huge second wave of COVID-19
infections hit the country last month."While the central bank will look to maintain adequate system liquidity, managing the increased supply
of sovereign bonds will be a tightrope walk," Nevatia said.
