RBI policy: Economists expect a 25 basis points cut tomorrow

Even as IIP forecast for June remains dim and retail inflation remains sluggish, calls for long term

With manufacturing activity contracting and retail inflation slowing, the Reserve Bank of India (RBI) will be hard pressed to announce a rate cut of at least 25 basis points in the upcoming Monetary Policy meeting.

Activity in the manufacturing sector, measured by the widely tracked Nikkei purchasing managers’ index (PMI) survey, has contracted in July for the first time since December when demonetisation induced slowdown made the sector contract.

However, in July, the contraction is much severe as PMI registered an eight and a half year low of 47.9 points. A reading above 50 indicates expansion;