UPDATE 1-India cbank governor to meet fin min on Friday

(Adds political context, quotes)

By Manoj Kumar and Rajesh Kumar Singh

NEW DELHI, April 16 (BestGrowthStock) – The head of India’s central
bank will meet the finance minister on Friday, an official
said, as the two sides try to balance growth with fighting
inflation ahead of the bank’s monetary policy review on April

The meeting, part of the central bank’s customary
pre-monetary policy consultation with the finance minister and
his team of top officials, is due to start at 1100 GMT.

While government officials spoke out against raising rates
ahead of the past two quarterly Reserve Bank of India (RBI)
meetings for fear of choking off recovery, they have toned down
their rhetoric ahead of next week’s meeting as inflation and
growth surge.

The RBI raised the CRR by a more-than-expected 75 bps in
January and followed it with a between-meeting surprise 25 bps
point increase in the repo and reverse repo rates in March.
Bond and swap markets have priced in an at least 25 basis
points rate rise and an increase in the cash reserve
requirements for banks that could help drain out liquidity
further to contain strong demand-side inflation pressures.

Signalling what analysts said may be a dovish outlook on
inflation from a growth-focused government, the finance
ministry’s chief economic adviser Kaushik Basu said on Friday
inflation had peaked but it would remain high with a downward

“The pro-growth stance probably trumps the anti-inflation
stance at the moment in terms of policy action,” said Philip
Wyatt, an economist at UBS in Hong Kong.

But inflation remains a hot-button political issue that has
helped invigorate the opposition, and the government would be
keen to stop opposition barbs from eroding its electoral
support after it won a fresh five-year term last year.

Rising prices have sparked opposition-backed street
protests and made India’s government reluctant to push through
reforms such as relaxing fuel and farm price controls.

The government faces a special parliamentary vote on high
prices in the ongoing budget session. If it loses the vote it
has to resign, although there is little risk of it losing power
anytime soon. No date has yet been set for the vote.
Government officials feel lower-than-forecast headline
inflation for March — which at 9.9 percent was still its
highest since October 2008 — allows the central bank to limit
the extent of tightening.

But there are worries that any rise in fuel prices to cut
the government subsidy burden could put further upward pressure
on prices. Also, top weather officials have predicted a normal
monsoon this year, adding to concerns that it will fuel its own
demand cycle thus stoking inflationary pressures.

For the central bank, inflation in March at 9.9 percent is
already above its end-March projection of 8.5 percent.

A Reuters survey showed most economists predict a rate hike
next week: roughly two-thirds predicted 25 basis point
increases and one-third foresaw 50 basis point hikes.

Economists were divided on whether and how much the central
bank would adjust the cash reserve ratio (CRR) for banks.

Fourteen of 20 expected an increase, with nine expecting a
25 basis point rise and five predicting a 50 basis point
increase. The CRR is at 5.75 percent now.
Stock Market Advice

(Writing by Krittivas Mukherjee; Editing by Sugita Katyal)

UPDATE 1-India cbank governor to meet fin min on Friday