6月货币政策委员会预览：通胀下降将推动再次降息：在紧迫性降低的情况下机会主义式降息

Restricted - External Aastha Gudwani+91 (0) 22 6719 6075aastha.gudwani@barclays.comBSIPL, IndiaShreya Sodhani+65 6308 4525shreya.sodhani@barclays.comBarclays Bank, SingaporeAmruta Ghare+91 (0) 22 6719 6074amruta.ghare@barclays.comBSIPL, India FIGURE 1. GDP and GVA growth rebounded in Q4 while the divergenceFIGURE 2. Industry growth accelerated in Q4 driven by faster-than-expected growth in manufacturing-2.00.02.04.06.08.010.0Mar-22Sep-22Mar-23Sep-23Mar-24Sep-24Mar-25IndustryAgricultureServicesGVA (% y/y)(pp contribution to GVAgrowth)High frequency activity indicators for Aprilare mixed so far,with 7 out of 15 variablesshowcasing improved y/y growth rates in April vs March. These include GST collection, dieseldemand, two- wheeler sales. On the other hand, power supply, steel production, and vehicleproduction growth disappointed the most. We are mindful of the global uncertainty thatweighed on production and external trade in April and thus would wait to see the full impact ofthetariffto-and-fro playing out. That said, so far, economic activity seems to be tracing a similarpath as last year (see Figure 7).InflationWith April CPI inflation at 3.16% y/yand May tracking lower than 3% y/y (with a similarrate likely in June), we expect Q1 FY25-26 CPI inflation (April-June) to average around2.9-3.0% y/y.This is much lower than the MPC’s forecast of 3.6% y/y, opening up the windowfor a potential rate cut.Such a sizable undershoot of the MPC's inflation forecast in Q1 couldlikely tempt the RBI MPC to revise down their CPI inflation forecast further from 4% y/y(was revised down by 20bp in the April meeting), but we believe it may be prudent toretain it. We expect the favourable seasonality in food prices to turn over the next fewmonths, typically witnessing enhanced volatility in vegetable prices.While an early onset ofthe monsoons is generally a good sign for food inflation, the recent episodes of sporadic rainshaveaffectedvegetable prices already. Western India's key agricultural regions haveexperienced heavy to very heavy rainfall since mid-May. This could damage standing crops (likeonions) or reduce crop deliveries, and spoil supplies (for eg., of tomatoes). Prices are up ~5% fortomatoes in the past couple of weeks.Modest impact of MSP for Kharif crops on headline CPI inflation:The Cabinet recentlyapproved the Minimum Support Prices (MSP) for 14 Kharif crops for the Kharif Marketing season(KMS) 2025-26 (October 2025- September 2026). The price increase is in the range of 3% (paddy)to 13.9% y/y (ragi). The MSPs are determined on the basis of a 'cost plus' formula, at a level of atleast 1.5 times of the all-India weighted average cost of production. Notably, the price increasesfor select major crops of consumption with higher weights in CPI are lower compared with theKMS 2024-25 (e.g. paddy: 3% y/y in 2025-26 vs 5.4% in 2024-25, tur: 6% vs 7.9%), while those forcoarse cereals and select oilseeds- (which have a relatively lower weight) is higher. Its importantto note that the MSP is binding only when it is higher than the current mandi/ wholesale tradingprice.At the time of writing, current prices of tur, urad, groundnuts and soybeans arelower than MSP. This implies, MSP increase, ceteris paribas, could result in higher food2 FIGURE 3. Vegetable prices have been lower but starting to showFIGURE 4. MSP increase has been lower than last year for keyconsumption staples024681012% y/yKharif crop, MSP increasesKMS 2024-25KMS 2025-26Source: Government of India, Barclays Researchinflation by 15-20bp. That said, the net impact will be a combination of Kharif productionand the government's procurement strategy.Customs duty cut on crude edible oils: The government has reduced the basic customs tax oncrude edible oils by 10% (from 20%). This decision aims to lower the cost of palm oil, soy oil,and sunflower oil, bringing theeffectiveduty down to 16.5%. But, the basic customs duty onrefined oil remains unchanged. Theeffectiveduty on refined oils is 35.75%. It remains to beseen whether the cut in customs duty on crude edible oils gets translated into refined edible oilswith some lag.Focus on transmission:As liquidity continues to stay in surplus, with the RBI's INR2.7trndividend added to it, we see no urgent reasons for the RBI MPC to announce any additionalliquidity infusion measures.Also, RBI Governor Malhotra made it very clear in the 9 Aprilmeeting that liquidity measures are the prerogative of the RBI and not that of the MPC. Hencethe RBI can choose to deploy additional measures as and when the need arises. We expect theGovernor to maintain that the RBI will continue to be nimble and will "proactively takeappropriate measures to ensure adequate liquidity".Proactive liquidity infusion measures by the RBI since the beginning of the year havepushed system liquidity to a surplus of INR1.75trn. This is still lower than the 1% of NDTL(~INR2.37trn), which Governor Malhotra has noted as an approximate range around which theRBI wou