After hikes in January, Guv Rajan maintained status quo in April (first under the new bi – monthly format). His ‘data dependent’ style of conducting monetary policy would mean a close watch on the CPI (“Glide path” guidance based on Urjit Patel committee reccomendations, i.e. 8% CPI by January next year and then 6% later with +/- 2%) and its trajectory. Last two readings of the CPI point to a re-surgence the food price pressures in the fruits & veggie segment
El Nino is a threat looming large. And it could accentuate the pressure on Indian agriculture leading to food price shocks. Remember 50% of CPI is food.
The previous hikes would still be playing out in the economy. That being the case, it hardly leaves room for easing. It calls for a status quo.