Policy to remain loose for a long time yet

We agree with financial markets and the analyst consensus that policy rates will be left on hold at the conclusion of the RBI’s upcoming MPC meeting on 4^th June, particularly given that the worst of the current virus wave now appears to be over. But any recovery will remain fragile, especially while the vaccine rollout remains stuck in first gear. So even as some EM central banks look to begin normalising policy later this year, the RBI is likely to keep rates unchanged for a long while yet.