To that extent, the Reserve Bank of India’s (RBI’s) surveys that capture sentiment and expectations of households and businesses are crucial. The crux of RBI’s surveys was that Indians believed inflation may be benign going forward, while businesses saw marginal improvement in future prospects. Cast your eyes on the adjoining three charts that may reveal the reasons for the central bank to slash policy rates. Chart 1 shows that inflation expectations have been firmly anchored, as households now expect inflation to fall in the coming three months as well as a year ahead. All told, it’s clear that it’s the benign outlook on inflation that is largely responsible for the rate cut by the central bank.

Source: Mint February 07, 2019 19:23 UTC