The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its three-day meeting on Wednesday, chaired by Governor Shaktikanta Das. The discussions will conclude on December 6, with the policy decisions scheduled to be announced on the same day.
The committee is expected to maintain the current repo rate at 6.5 percent, which has remained unchanged for the last nine meetings and the status quo may continue for some more time, as an immediate rate cut may not be easy for the MPC to justify, especially as their commentary has been assertive on durable disinflation being the primary mandate, experts said.
India’s GDP grew by 5.4 percent in the second quarter of the current financial year as the Consumer Price Index (CPI), stood at 6.21 percent in October, exceeding the RBI’s projection of 4.8 percent.
Emkay Global Financial Services said, “The timing and window of cuts are tricky and small amid fluid global dynamics, while the RBI may also want to weigh the FX cost of rate cuts (liquidity implication/sterilization cost, and imported inflation).”
Even as inflation is likely to ease by the end of March 2025 (led by easing food), it is far from the 4 percent durability the RBI has been seeking in order to avoid any feedback loop to generalised inflation. The recent RBI commentary has been assertive on this front, albeit with a presumption that growth is robust.
In October, the MPC left the repo rate at 6.5 percent and adopted a neutral stance. The standing deposit facility (SDF) rate was left unchanged at 6.25 percent, while the marginal standing facility (MSF) rate and the bank rate remained steady at 6.75 percent.
Data shows inflation in October exceeded the RBI’s upper tolerance limit of 6 percent, surging to 6.21 percent. Food inflation reached 10.87 percent, with vegetable inflation at 42.18 percent. Rural inflation stood at 6.68 percent, while urban inflation was comparatively lower at 5.62 percent.
Additionally, the economy grew by 5.4 percent in real terms during the July-September quarter of the 2024-25 financial year. This growth was significantly lower than the RBI’s forecast of 7 percent.
