As we approach the Reserve Bank of India’s (RBI) first bi-monthly monetary policy meeting for the fiscal year 2024-25, scheduled for April 3-5, 2024, with the announcement set for April 5, the anticipation and speculation are running high. The RBI, under Governor Shaktikanta Das, faces the critical task of balancing economic growth with inflation control in a complex global economic landscape.
Despite India's robust GDP growth forecast of nearly 8 percent, experts predict the RBI might maintain the status quo on the main interest rate in the upcoming policy announcement. This cautious approach, prioritizing inflation targeting towards the 4 percent goal, suggests a shift in focus from stimulating growth to stabilizing prices. The consistent inflation range around 5 percent, coupled with potential food inflation shocks, reinforces the likelihood of maintaining the current rate.
The Monetary Policy Committee (MPC) is also expected to weigh in on the global economic scenario, especially considering the strategies adopted by central banks in major economies like the US and UK. With these countries taking a cautious route towards rate adjustments, the RBI's decisions are likely to echo a similar sentiment.
The Indian economy has exhibited impressive resilience, with the National Statistical Office (NSO) revising GDP growth for the first two quarters of FY 2023-24 to 8.2 and 8.1 percent respectively. This growth trajectory, surpassing initial estimates, has somewhat alleviated the RBI’s growth concerns, allowing for a stronger focus on inflation control.
Given the current economic indicators and global trends, a change in the RBI's policy stance is unlikely before the August 2024 MPC review. Factors such as the monsoon's performance, sustained growth momentum, and the US Federal Reserve's rate decisions will play a crucial role in shaping future policies. Consequently, any potential rate cuts are most likely to occur in the October 2024 meeting, and even then, they are expected to be modest, reflecting a cautious and gradual approach to monetary easing.
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