According to a Reuters survey, the RBI will reduce its rates again in August because of the doves

BENGALURU (Reuters) – The Reserve Bank of India is expected to lower its interest rates in August for the fourth consecutive meeting, according to a poll by Reuters economists, the majority of whom said the risks for their already modest growth forecasts were more downward biased.

If the RBI cuts rates next month, it will be the most aggressive of Asian central banks. The last time the RBI made so many consecutive cuts occurred after the global financial crisis more than a decade ago, when most major central banks struggled to further reduce economic growth .

Nearly 80% of the 66 economists surveyed in the July 17-24 survey expected the RBI to reduce its repo rate by 25 basis points to 5.50% at the August 7th meeting. . Three respondents predicted a reduction of 50 basis points and the remaining 10 policies pending.

"It's cooked in the cake. They will cut rates in August and later, mainly because of weak growth and low inflation, "said Gareth Leather, Senior Economist for Asia at Capital Economics.

India's inflation has been below the central bank's medium-term target of 4% for almost a year and is not expected to exceed this level by at least 2021.

The survey findings confirm recent comments by RBI governor Shaktikanta Das on the central bank's accommodative stance and suggest further easing.

Indeed, after the planned installation next month, the next rate cut will occur in early 2020, after which the RBI should keep its rates unchanged at 5.25% until the end of 2020.

Yet, despite three interest rate cuts this year and other forecasts, India's growth prospects have been degraded in the latest poll compared to the previous quarterly economic survey in April.

Asia's third economy grew 5.8% year-on-year in the corresponding quarter from January to March, its slowest pace in five years and the loss of its China title as economy to fastest growth. India is now expected to grow between 6.3% and 7.2% per quarter until the end of March 2021.

The risks for the more modest growth forecasts for this year have been more biased, said a majority of economists having answered a follow-up question.

The annual growth forecast was lowered to 6.8% for this year compared to 7.2% in the previous survey. This is slightly below the latest growth forecast of the International Monetary Fund of 7.0% for this year.

"The Indian economy continues to show weak growth momentum. We believe that if the recovery is nascent, maturity is still a long way off, "said Rini Sen, an Indian economist at ANZ.

"The impact of the liquidity facility and accommodative monetary policy is gradually being felt. In the absence of a substantial budget boost, however, more is needed on the monetary side. "

When asked if the RBI should consider underlying inflation rather than retail inflation as the main measure of its monetary policy framework, a majority of economists responded no but nearly 30% of those surveyed said it.

"Underlying inflation is a better measure of the underlying price pressures than the overall rate. This should therefore give a better indication of the economic situation in the economic cycle, "said Shilan Shah, senior economist at Capital Economics in India.

"The prices of food and fuel are very volatile and they do not say much about the demand on the ground."