The RBI is slated to announce the next bi-monthly monetary policy on Wednesday.
The two-day Monetary Policy Committee meet of the Reserve Bank of India (RBI) will start on Tuesday.
The six-member team, chaired by the RBI Governor will deliberate the current scenario and take a decision whether to cut key rates, hike them or maintain status quo. December 7 will be Patel's second monetary policy as the RBI Guv.
As the current scenario stands, the most important aspect of discussion for the RBI panel will be the government's demonetization move, which has taken the country's economy by storm since the removal Rs 500 and Rs 1,000 legal tenders from the system.
In the aftermath of the decision "to remove black money and stall terror funding," the country's demand and consumption have taken a hit. Several small businesses and logistics have reportedly come to a standstill in the absence of the high-denomination notes. While the numbers aren't out on what demonetization has caused the country in terms of a loss to business, many experts and brokerages have already lowered their estimates for the FY17 GDP as a direct impact of demonetization.
In November, the country's manufacturing and services sector took a hit, as a direct fallout of the demonetization move. Nikkei's India Manufacturers' Purchasing Managers' Index (PMI) in November fell to 52.3 index points from 54.4 while the Services PMI fell to 46.7 index points from 54.5. A figure above 50 indicates expansion in the sector while a figure under 50 indicates contraction.
While inflation targeting was set as the main agenda for the RBI and the monetary policy panel, for this outing at least, the central bank is expected to focus on growth while inflation remains within the reach of their target. Will the central bank hold rates or cut? We will know on Wednesday at 1430 hours.
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