iNDICA NEWS BUREAU-
The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is set to announce its first monetary policy under new Governor Sanjay Malhotra this Friday. Experts anticipate a 25 basis points (bps) cut in the repo rate, aiming to support economic growth while keeping inflation in check.
A report from Bank of Baroda highlights that inflationary pressures have eased, largely due to a drop in the prices of essential vegetables like tomatoes, onions, and potatoes. This improvement in supply has led to reduced volatility in the Consumer Price Index (CPI), giving the RBI some flexibility for a measured rate cut.
The report adds, “Balancing and counterbalancing all macro and geopolitical factors, we believe there remains space for a 25 bps rate cut by the RBI in the upcoming policy.”
Currently, the repo rate stands at 6.50 percent, where it has remained unchanged for the past eleven meetings. In December, the MPC voted 5-1 in favor of holding the rate steady, focusing on stability while monitoring inflation trends. However, the December policy also saw a 50 bps reduction in the Cash Reserve Ratio (CRR), bringing it down to 4 percent to enhance liquidity and encourage credit growth.
While a 25 bps rate cut is widely expected, analysts also anticipate that the RBI will implement additional liquidity measures to address ongoing cash flow concerns within the banking system.
Emkay Research notes that investors and market participants are looking for more than just a rate cut, as liquidity challenges persist.
For FY 2024-25, the RBI has projected India’s real GDP growth at 7.2 percent, while the Economic Survey estimates growth at 6.4 percent, in line with the National Statistical Office (NSO) projections. Given these economic forecasts, a cautious and measured approach to rate cuts is expected, with future reductions depending on inflation trends and broader economic conditions.
As the MPC finalizes its decision, market participants will closely monitor Governor Malhotra’s stance on rate cuts, liquidity management, and any additional policy measures aimed at maintaining India’s economic momentum.
