RBI signals cautious optimism on growth-inflation balance
Subscribe to enjoy similar stories. The Reserve Bank of India’s (RBI) monetary policy on 6 December voted 4:2 to keep the policy repo rate unchanged at 6.50%. Two of the external members, Dr.
Nagesh Kumar and Professor Ram Singh voted to reduce the policy rate by 25 basis points (bps), while other four members voted to maintain the status quo on rates. All members of Monetary Policy Committee (MPC) unanimously decided to continue with the neutral stance and to remain unambiguously focused on durable alignment of inflation with the target, while supporting growth. To support the overall liquidity conditions, RBI decided to lower the cash reserve ratio (CRR) to 4% from 4.50%.
The RBI lowered the real GDP growth forecast for FY25 to 6.6% from 7.2%. Moreover, the Q1FY26 GDP forecast has been reduced to 6.9% from 7.3% while forecasting the growth at 7.3% for Q2FY26. The lower GDP growth in Q2FY25 at 5.4% has mainly been driven by shrinking private consumption expenditure and investment growth.
The manufacturing purchasing managers’ index (PMI) felt to 56.5 in November’24 from 57.5 in October’24 while the services PMI narrowly declined to 58.4 in November’24 from 58.5 in October’24. However, the high frequency indicators suggest that the domestic economic activity have bottomed out in Q2FY25 and has since recouped support from the festive season followed by an uptick in rural activities. This may help some uptick in GDP growth in H2FY25.
After the October ’24 inflation data came in at over 6%, the RBI revised the FY25 inflation forecast to 4.8% from 4.5% in its Oct ’24 policy. As the monsoon season comes to an end, the food inflation is likely to decrease in Q4FY25 with kharif harvest arrivals. Moreover, the superior soil
. Read more on livemint.com
