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The Reserve Bank of India (RBI) concluded its final Monetary Policy Committee (MPC) meeting for 2024, delivering a mix of policy continuity and strategic interventions to address economic challenges. With inflationary pressures and global uncertainties shaping its decisions, the central bank has opted to maintain the repo rate at current levels while introducing measures to support liquidity, boost rural credit, and attract foreign investments.
Here’s a comprehensive look at the key updates and their implications.
1. Repo Rate Unchanged at 6.5%
For the eleventh consecutive meeting, the RBI has held the repo rate steady at 6.5%, signalling its commitment to inflation management while supporting economic growth.
2. GDP Growth Outlook Revised
Acknowledging global and domestic economic headwinds, the RBI revised its GDP growth forecast for FY25 from 7.2% to 6.6%. Here’s a breakdown of the revised quarterly estimates:
Quarter | Previous Forecast | Revised Forecast |
Q3 FY25 | 7.4% | 6.8% |
Q4 FY25 | 7.4% | 7.2% |
Q1 FY26 | 7.3% | 6.9% |
3. Inflation Estimates Adjusted
Despite annual retail inflation breaching the upper tolerance band at 6.21% in October, the RBI anticipates easing pressures. Inflation for FY25 is forecasted at 4.8%, with a downward trajectory expected in subsequent quarters.
4. CRR Reduced to 4%
In a significant move to enhance liquidity, the RBI slashed the Cash Reserve Ratio (CRR) by 50 basis points. This will inject ₹1.16 lakh crore into the banking system, supporting credit growth and financial stability.
5. Foreign Investment Incentives
To attract more foreign capital, the RBI has raised the interest rate ceilings on FCNR-B deposits and increased FCNR deposit rates. These measures aim to strengthen the rupee and enhance India’s appeal as an investment destination.
6. Support for the Agricultural Sector
The RBI has increased the limit for collateral-free agricultural loans from ₹1.6 lakh to ₹2 lakh per borrower, a critical step in empowering rural communities and fostering economic inclusivity.
7. Ethical AI and New Benchmarks
1. Easing Liquidity Constraints
The reduction in CRR will help ease liquidity pressures, lower borrowing costs, and support credit flow to businesses.
2. Encouraging Rural Demand
Increased agricultural credit limits will help drive rural consumption and investment, benefiting sectors reliant on rural markets.
3. Stable Inflation Outlook
With inflation projected to moderate, consumers and businesses alike can expect some relief in cost pressures.
4. Strengthening the Investment Climate
Higher FCNR deposit rates are expected to attract foreign capital, bolstering the rupee and reducing external vulnerabilities.
What This Means for Investors
For investors, these developments can open up opportunities across multiple sectors:
The RBI’s December 2024 policy review reflects a carefully balanced approach to managing inflation, sustaining growth, and promoting financial stability. While challenges persist, these measures provide a roadmap for navigating uncertain times.
As an investor, staying informed and strategically positioned is essential. Bajaj Broking's expert research team can help you identify opportunities arising from these policy changes.
For more details, check out the report by Bajaj Broking’s Research Desk
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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