Weak GDP and inflation data unlikely to sway RBI

The weakness of the latest GDP and inflation data has reignited talk that the Reserve Bank of India (RBI) may loosen at the upcoming policy meeting on 7th June. However, more timely indicators suggest that there has been a big improvement in activity since early in Q1. The recent drop in inflation may be more likely to sway policymakers. But a single month’s data is unlikely to trigger a reversal from the RBI, which had sounded hawkish at the last policy meeting. We expect rates to be kept on hold next week.