The Reserve Bank of India’s (RBI) high-level panel began deliberations on Wednesday for the upcoming bi-monthly monetary policy review, with most experts expecting no change in interest rates as retail inflation remains above the central bank's upper tolerance level.
The decision, made by the six-member Monetary Policy Committee (MPC) chaired by RBI Governor Shaktikanta Das, will be announced on Friday, December 6. This meeting is significant as it marks the final MPC session of Das’s current term, which ends on December 10.
The Indian government has tasked the RBI with keeping the consumer price index (CPI)-based inflation at 4%, with a permissible margin of 2% on either side. Since February 2023, the RBI has maintained the repo rate at 6.5%, and experts suggest that any easing of rates may not occur until 2025.
A report from State Bank of India (SBI) stated, "We do not foresee a rate cut during the current fiscal year... The first rate cut and further changes in stance are likely in April 2025." It further advised that the second-quarter GDP growth figures should not prompt an immediate response such as a rate cut, especially since inflation remains at high levels.
India’s economic growth slowed to 5.4% in the July-September quarter of this fiscal year, the weakest in nearly two years, driven by weak performance in the manufacturing and mining sectors. In comparison, GDP had expanded by 8.1% in the same quarter of the previous fiscal year.
The RBI last raised the repo rate to 6.5% in February 2023 and has kept it unchanged since. It also kept rates steady in its previous bi-monthly review in October, citing concerns over rising food inflation.
Market participants expect the MPC may focus on liquidity management rather than a rate cut. Mandar Pitale, Head of Treasury at SBM Bank India, suggested that the RBI could reduce the Cash Reserve Ratio (CRR) in phases, injecting liquidity to support economic growth. The MPC may also consider liquidity infusion via Open Market Operations (OMO) purchases.
Atul Monga, CEO and Co-founder of BASIC Home Loan, expects the RBI to maintain the repo rate, balancing inflation control with economic growth support. He added that steady interest rates would likely keep housing demand stable, particularly in the mid-range and luxury segments, benefiting both developers and home buyers.
The MPC, which has raised rates a total of 250 basis points since May 2022, includes members such as Nagesh Kumar, Director of the Institute for Studies in Industrial Development; Saugata Bhattacharya, Economist; Ram Singh, Director at the Delhi School of Economics; Rajiv Ranjan, Executive Director at the RBI; Michael Debabrata Patra, Deputy Governor at the RBI; and Shaktikanta Das, RBI Governor.
Follow us
