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BUSINESS EYE OCTOBER 18, 2024 | The Indian Eye 34

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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