The Reserve Bank of India will meet for its quarterly monetary policy on Tuesday.

Six weeks ago Governor D Subbarao shocked markets by refusing to cut interest rates. Hardly anyone in the market sees a high probability of a rate cut specially after the RBI made its priorities and concerns clear in the mid quarter review. Since then, little has changed on the macroeconomic front to allow room for a rate cut. Here are five reasons why RBI is not expected to cut rates:

1) FISCAL DISAPPOINTMENT The biggest disappointment for the RBI will continue to be the lack of fiscal action. Despite the RBI's clear message, that further monetary policy action will be linked to signs of credible fiscal consolidation, the government has done nothing. All they have done was to give one political excuse after another for keeping measures on hold. And so, we still await that diesel price hike. The fuel subsidy burden could rise to Rs 1,80,000 crore at $ 105 per barrel oil for the rest of 2012-13. A Rs 5 per litre increase in diesel prices would reduce that by Rs 25,000 crore, according to Kotak Securities estimates. 2) INFLATION RISKS Inflation risks have remained high. The last print on the wholesale price index or WPI and consumer price index or CPI was lower than expected but still remains well above the RBI's comfort level. There has also been a trend of upward revisions in the WPI data, so it would tough to take comfort in the 7.25 per cent read on WPI in June. CPI too remains in double digits. With food prices rising due to a poor monsoon, CPI will likely remain uncomfortable in the months to come. Core inflation is the relatively comfortable indicator. However, RBI has made it clear that they are looking at all indicators of inflation and that one can't call for a rate cut based on the steady core inflation numbers. 3) SLUGGISH GROWTH The growth scenario remains unchanged. Private investment remains on hold. The government has started to make some efforts to revive sector like coal and power but these are measures which will play out in the medium term rather than the short term. This means the investment side of the economy remains weak. The consumption side is where there is still hope. Despite fears of a crack in the domestic consumption, we are yet to see any indicators to show that consumption demand is falling off a cliff. It has moderated, yes. But that was the intention of the RBI so they are unlikely to be fazed by it. 4) GLOBAL FEARS The fourth variable remains global growth. Here, there has been a worsening of conditions.

In response, most central banks, including Asian central banks, have cut rates to support growth. However for India, the domestic macro-economic conditions will and should remain the prime focus. And so, while the RBI may take note of global conditions, it seems difficult to justify a rate cut based on global conditions. 5) LIQUIDITY EASES And then there is liquidity. This is the amount of money supply in the market. Central banks absorb or inject money into the market by buying or selling government securities from banks. These are called open market operations or OMOs. They also use cash reserve ratio or CRR to manage liquidity. CRR is the percentage deposits banks have to maintain with RBI. Liquidity has eased in the past 6 weeks and now is well within the RBI's comfort zone. It is indeed possible, that liquidity pressures will resurface due to the structural sluggishness in the deposit growth. A need to inject money into the system occurs if the credit demand is higher than the deposit growth. But the RBI may not want to pre-empt that with a cut in Cash Reserve Ratio. If liquidity pressures were to re-emerge, they can just as easily restart open market operations or OMOs or cut CRR if and when required late