Fractured Lok Sabha election verdict unlikely to impact RBI’s monetary policy: Experts

Lead Economist of Emkay Global Financial Services, Madhavi Arora, was quoted as saying by Moneycontrol, “As of now, the new political equation doesn't change anything much for the Reserve Bank of India (RBI) in the immediate run, as the political dust is yet to fully settle."

"The RBI is unlikely to change its view on broad macro contours on account of this,” Madhavi Arora added.

Moneycontrol reported, quoting Group Chief Economist of Manappuram Finance Madhavankutty G, that as per the memorandum of understanding (MoU) between the RBI and the government, the country's central bank has to bring CPI (Consumer Price Index) inflation down to 4 percent, which means they are not bound by electoral outcomes.

The six-member MPC of the RBI will be releasing its policy decision on Friday (June 7), and this will be the second bi-monthly monetary policy in the current financial year.

Earlier on May 27, a Moneycontrol poll of 20 economists and bankers showed that the MPC is likely to maintain the status quo in the upcoming June monetary policy meeting, while remaining cautious on inflation.

Majority of experts said the RBI will maintain its ‘withdrawal of accommodation’ stance, while some economists believe it will be changed to `neutral.'

The national election verdict has not thrown up a clear mandate for any single party as the BJP has secured 240 seats, followed by the Congress (99 seats) and Samajwadi Party (37).

As no single party has succeeded to reach the majority mark of 272, anyone who wants to form a government has to take the support of various allies.

According to the Election Commission (EC) website, the BJP-led NDA bagged 293 seats and the opposition INDIA bloc got 233, while two NDA allies — Chandrababu Naidu's TDP and Nitish Kumar's JD (U) — with 28 MPs between them, are expected to play a decisive role in helping the NDA to form government in the centre.

According to reports, Narendra Modi is all set to take charge as Prime Minister for a third consecutive term.