RBI governor Shaktikanta Das headed six-member rate setting panel started its three-day brainstorming meeting on Tuesday in the backdrop of the budget projecting a widening of fiscal deficit amid a slowing economy and hardening inflation.

The Monetary Policy Committee (MPC), which announces the benchmark lending rate (repo), has been tasked to check inflation

The retail inflation that for several months remained in the comfort zone of the central bank has started inching up and crossed the 7 per cent mark during December, mainly because vegetables.

Experts said the MPC members are going to have a tough time as slowing economy makes the case for reduction in repo rate, while rising inflation and higher fiscal deficit will require the RBI to either hike the rate or maintain a status quo.

The sixth bi-monthly monetary policy statement for 2019-20 will be announced at 1145 hours on Thursday.

The government has estimated India’s gross domestic product at 5 per cent in the current financial year owing to both domestic as well as global factors amid weakening consumption demand in the country. In December, the retail inflation also peaked to a five-year high of 7.3 per cent, mainly due to costlier vegetables, specifically onion and tomato.

In its previous monetary policy review in December, the RBI had decided for a status quo, leaving the repo unchanged at 5.15 per cent on concerns of rising inflation.

While presenting the Union Budget on February 1, finance minister Nirmala Sitharaman projected the fiscal deficit to widen to 3.8 per cent of the GDP against the earlier estimate of 3.3 per cent.