Every two months of a fiscal year, market, investors, experts, economists, rupee, banks and industries keep an eye on the Reserve Bank of India (RBI) as they present India’s monetary policy which reflects the country’s financial ability. The same day is back, as the RBI will be presenting sixth monetary policy of India tomorrow, surprisingly, early this time compared to their traditional pattern. That said even as a common man one should look out for RBI’s decision on policy repo rate, because for your information either the interest rate is unchanged or increased or decreased they do play a role in your goods and services. Not many are aware, but it's quite true that RBI’s repo rate stances add a value to a citizens buying habit. 

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Now that the table is being prepared in RBI bhavan, tomorrow’s trading in Dalal Street and forex market will depend on India’s monetary policy announced by new governor Shaktikanta Das and monetary policy committees. 

For you, the first thing to note is that RBI's policy positioning depends upon the Consumer Price Index (CPI) or retail inflation of the country. RBI decides the repo rate, in line with performance of CPI which has a major impact on your purchasing and selling power. 

Currently, CPI has eased to almost 18-month low at 2.19% for December 2018 month. This was due to deflation in  Pulses and products (- 7.1%) and Vegetables (-16.1%), Sugar and Confectionery (-9.2%) and Eggs (-4.3%). Strangely, core inflation showed an opposite trend, as they increased  to 5.73% in Dec18 due to huge jump in health (9.0%) and education (8.4%) inflation.

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Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI said, “ The most puzzling aspect of the inflation data is the increase in rural health and education inflation at the time when rural demand is collapsing. Urban core CPI has declined to 5.26% during Dec’18. Such contrarian movement in urban core and rural core is bemusing as over a 7-year period, correlation between the rural and urban core was at 0.85. In the past Rural and Urban Core have moved in opposite directions on only two occasions and such period of recurrence was 4-5 months.”

Ghosh said, “We are now concerned that this data aberration could obfuscate policy choices. Even though we expect a hold in February policy, but RBI may surprise the market with a rate cut that may not be negated .”

Core inflation has been a real spoilsport for RBI in passing on the rate cut benefit. Last year, with core inflation the danger was added from forex and global front as well. Boiling crude oil prices and weak Indian rupee in 2018, forced RBI under the then governor Urjit Patel to hike repo rate on two occasion by almost 50 basis points. With this, policy repo rate now stands at 6.5% at two-year high with calibrated tightening of monetary policy.

As a common man, you always benefit from a low stable inflation and policy repo rate cut. 

Majority of experts just like SBI are hoping for a status quo in this February 2019 policy. CARE Rating says, The RBI is likely to alter its monetary policy stance from “calibrated tightening” to “neutral” with inflation being lower than its target for 5 consecutive months but will maintain status quo in the repo rate given the core inflation being sticky at 5% and likelihood of build-up in inflation in the coming months.”

However, the window for a policy repo rate cut does not rules out in February 2018. Why? Considering that RBI has decided to announce the policy at 11.45 am on Thursday morning, from previous format  of 2.30 pm - anything can be expected. RBI may look into December CPI which has eased and well under the target of the central bank, Das might just announce a rate cut. Also in a past pattern, even Patel when took charge for the first time surprised everyone by making a rate cut. Das can follow a similar pattern, because ahead of general election a rate cut will also come as a good news for NDA government.

What’s a common man’s desire? 
One should always pray not to see an higher inflation rate, as they impact the severely the economy and your end products. It not only affects your household budget but also in a long run makes tempers the savings and fixed income instruments of a citizen. 

Thereby, everyone prefers low inflation. In his Budget 2019 speech, interim Finance Minister Piyush Goyal said, “Our government broke the back-breaking inflation. We have brought down average inflation to 4.6 per cent, which is lower than the inflation during the tenure of any other government.”

When inflation are low - they make prices of goods and services rise at slower space. Products of India becomes more competitive in comparison to international prices - this in return helps in improvement of the country’s trade balance via rise in exports. 

Firms also prefer low inflation, because then it makes it very easier for them in making more investment and which reveals in future costs, prices and wages. If prices change at a slower rate, this gives ample of time to firms in spending less time and energy on updating prices of your goods.  

Even savings see a jump in this scenario, as banks will be in better position to offer you real rate of return on your savings. 

If prices of products are stable, this means lower expenses for common man and more investment from them which adds another value to economic growth. On the similar lines, if prices are stable there is rise in demand in a goods and services which helps the earnings of firms.

Finally, low inflation makes your income rise, as nominal wage growth is constant in the period. 

RBI hikes repo rate to control rising inflation. Now that situation is not that bad, RBI’s rate cut will bring in further good news for you. As a lowered interest rate makes it even more flexible for companies to borrow at a cheaper rate from banks. Not only they, but even your home loan, personal loan and vehicle loan interest rate may also get eased, hence your EMIs will become cheaper.