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BUSINESS EYE                                                        OCTOBER 11, 2024       |  The Indian Eye 36


          High growth & low inflation: Rate cut on the



               anvil as RBI predicts growth rate of 7.2%





          SBI report raises the intriguing possibility that the RBI might be laying the groundwork

                            for a rate cut, despite the strong momentum in economic growth



        OUR BUREAU                                                                                            economic growth.
                                                                                                                  It points out that such a move
        Mumbai
                                                                                                              would be unprecedented, apart from
              he Reserve Bank of India                                                                        a brief period in 2016 when a new
              (RBI)  has  projected  India’s                                                                  Monetary Policy Committee (MPC)
        Treal GDP growth for FY25 at                                                                          had taken over.
        7.2 per cent, while CPI inflation for                                                                    “This raises an interesting ques-
        the  fiscal  year  is  expected  to  mod-                                                             tion as to whether RBI is preparing
        erate to 4.5 per cent, post Monetary                                                                  the grounds for an ensuing rate cut
        Policy Committee (MPC) meeting                                                                        harmonizing with current momen-
        on Wednesday.                                                                                         tum in growth” the report said.
            Das said, “Real GDP growth for                                                                        The scenario is particularly
        2024-25 is projected at 7.2 per cent.                                                                 noteworthy because, in most coun-
        With Q2 at 7 per cent, Q3 at 7.4 per                                                                  tries, including India, rate cuts typi-
        cent and Q4 7.4 per cent. Real GDP                                                                    cally occur when economic growth is
        growth for Q1 of next financial year                                                                  slowing down, not when it is accel-
        that is 2025-26 is projected at 7.3 per                                                               erating.
        cent and the risks are evenly bal-                                                                        The SBI analysis highlighted that,
        anced.”                                                                                               barring the case of the Philippines,
            According to RBI Governor                                                                         countries that have implemented
        Shaktikanta Das, growth for the fis-                                                                  rate cuts generally did so when their
        cal year will be supported by robust                                                                  GDP growth was lower than the av-
        quarterly performances.             Reserve Bank of India (RBI) Governor Shaktikanta Das addresses the IBA’s annual banking   erage of the preceding four quarters.
            However,  Inflation  in  the  third                                                               In contrast, India’s projected growth
        quarter is forecasted a little higher       conference FIBAC 2024, at Trident Hotel in Mumbai recently (ANI)  remains robust, making the possibil-
        at 4.8 per cent, with further moder-                                                                  ity of a rate cut all the more unusual.
        ation anticipated in the fourth quar-  year 2024-25, a latest report by State   monizing with current momentum in   The report suggested that the
        ter when the kharif harvest comes.  Bank of India noted that historical-  growth. “Perhaps a 7 per cent growth   RBI  may  be  strategically  offering
        However, RBI cautions that agricul-  ly a rate cut with such a high growth   with a rate cut has never happened   markets ample time to prepare for
        tural output remains susceptible to   has rarely, if ever, occurred in India   in India’s history or the world histo-  an eventual shift in monetary policy.
        weather-related shocks, which could   or globally.                  ry” said the SBI report.          With foresight, the central bank ap-
        influence inflationary trends.        The report also noted that it     The report raises the intriguing   pears to be signaling that it is keep-
            After the Reserve Bank of India   raises an interesting question as   possibility  that the RBI might be   ing a close watch on both growth and
        projected more than 7 per cent of   to whether RBI is preparing the   laying the groundwork for a rate cut,  inflation  dynamics,  possibly  hinting
        GDP growth for the entire financial   grounds for an ensuing rate cut har-  despite the strong momentum in   at future policy adjustments.


         World Bank raises India’s growth outlook for FY25 to 7% from 6.6%



               he World Bank has  raised   growth,” the World Bank added in     The Asian Development  Bank   ing the rural economy in FY2024.
               India’s economic growth    its South Asia’s Growth forecast re-  (ADB) in September last month     In its earlier revision, the world
         Tforecast from 6.6 per cent      port released on October 10.      forecasted India’s economic growth   financing  body  had  attributed  ro-
         to 7 per cent for the financial year   Many global rating agencies and   at  7  per  cent  for  the  financial   bustness and strength in domestic
         2024-25 citing the growth of agri-  multilateral organisations have also   year FY2024 and 7.2 per cent for   demand and a rising working-age
         culture output and policies as a ma-  revised their growth forecasts for In-  FY2025. ADB reiterated that In-  population behind its growth pro-
         jor factor contributing to the em-  dia upward.                    dia’s economic growth will remain   jections.
         ployment growth in the economy.      In July, the International Mon-  robust.                            Going further, the global body
             “Growth in India is projected   etary Fund (IMF) has raised India’s   ADB, in its September edi-  added that the growth in South
         to  reach  7.0  per  cent  in  FY24/25   growth projections for 2024 from 6.8   tion of Asian Development Out-  Asia is expected to increase to 6.4
         with larger-than-expected agricul-  per cent to 7 per cent, reinforcing the   look (ADO), highlighted that an   percent this year, exceeding earlier
         tural output and policies to foster   country’s status as the fastest-grow-  above-average monsoon in most   projections and keeping the region
         employment  growth  contributing   ing economy among emerging mar-  parts of the country will lead to   on track to be the fastest-growing
         to strong private consumption    kets and developing economies.    strong agricultural growth, enhanc-  in the world.




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