ALSO READRBI expected to revise down GVA growth projection, keep rates unchanged With inflation rising, RBI may not make the next rate cut in a hurry: HSBC GDP numbers: A manufacturing blow; but are investments turning the corner? RBI should have cut interest rate to boost growth: India Inc RBI retains GVA growth at 7.3% for FY18
British brokerage HSBC Tuesday said GVA growth will come in at 6.3 per cent for the second quarter, and risks to inflation will prevent the Reserve Bank from tinkering its policy rates at the next review.
Growth data for the July-September period is expected to be released on Thursday, while the Reserve Bank will be coming out with a bi-monthly review on December 6.
"While recovery is expected to be only modest, inflation risks are edging higher," economists at the brokerage said.
In a note, they said gross value added (GVA) growth will come at 6.3 per cent for the second quarter, which is higher than the three-year-low of 5.7 per cent clocked for the preceding three months, but much lower than the economy's potential.
It said agricultural growth will moderate on low production of key crops and a drag from animal husbandry to its long-term average, while industrial growth will go above 4 per cent as manufacturing is picking up pace.
After slumping in June, core inflation climbed back to over 4 per cent and is expected to remain sticky or accelerate further as well, on items like household goods and services, health, personal care, it said.
"No reason to tweak policy rates, till clear signs emerge. Given inflation risks are tilting on the upside, the RBI will keep the repo rate on hold at 6 per cent in the foreseeable future, giving primacy to the inflation target," it said.
It said an interest rate cut will be "unwarranted" given that RBI expects growth to pick up to 7 per cent level in the second half of the fiscal, while a hike in rates will be "detrimental" to the "fragile" recovery.