<p class="bodytext">It was widely expected that the Reserve Bank of India (RBI) would reduce the repo rate at its meeting last week and send out a fresh signal that it would promote economic growth. The Monetary Policy Committee (MPC) has done that by making a 25-basis-point cut in the rate, bringing it down to 5.25%. It has reduced rates by a cumulative 125 basis points this year, and it is biggest easing of rates after the pandemic era. RBI Governor Sanjay Malhotra said that the present moment was a “rare Goldilocks period” when strong GDP numbers co-existed with inflation at a benign 2.2%. The economy grew at a robust 8.2% in the second quarter, and is projected to grow at 7.3% in the current fiscal. The rupee’s exchange rate has been falling, and has breached the Rs 90 per dollar mark. Malhotra also made the realistic announcement that the central bank would allow the domestic currency to find its correct market-determined level.</p>.<p class="bodytext">The RBI’s neutral stance marks a considered and calibrated shift from inflation control to growth support. Strong growth was observed across important sectors, including manufacturing and services, though the nominal GDP growth at 8.8% during the year’s first half was lower than the 10.1% projected in the Budget. Inflation is below the bank’s target and tolerance limit, and inflation forecasts do not indicate any serious uptick in the coming quarters. Industry has generally welcomed the cut as a measure that will help to boost credit off take, consumption, and investment. Working capital and investment loans will become cheaper, and it can help capital expenditure to pick up. It will be welcomed by borrowers too as home loans and other forms of retail credit will come cheaper. The RBI policy aligns with the government’s strategy of boosting consumer demand, which was seen in the decisions to cut income tax and GST rates.</p>.Private or government school? How parents in Karnataka decide.<p class="bodytext">Monetary easing alone cannot propel India into a higher growth orbit. Banks should be able to pass on the rates to the customers, and the government should support the new credit regime with fiscal discipline. The RBI has done well to announce measures to boost liquidity. While it has taken a positive stance, it is also cautious. It says that “there are some emerging signs of weakness in a few leading indicators” and uncertainties on the external front. Goods exports declined in October because of the high tariff regime. The central bank has projected growth to soften to 7% in the third quarter and 6.5% in the fourth quarter. Considering the adverse factors, the target of 7.3% for the whole year may be challenging.</p>
<p class="bodytext">It was widely expected that the Reserve Bank of India (RBI) would reduce the repo rate at its meeting last week and send out a fresh signal that it would promote economic growth. The Monetary Policy Committee (MPC) has done that by making a 25-basis-point cut in the rate, bringing it down to 5.25%. It has reduced rates by a cumulative 125 basis points this year, and it is biggest easing of rates after the pandemic era. RBI Governor Sanjay Malhotra said that the present moment was a “rare Goldilocks period” when strong GDP numbers co-existed with inflation at a benign 2.2%. The economy grew at a robust 8.2% in the second quarter, and is projected to grow at 7.3% in the current fiscal. The rupee’s exchange rate has been falling, and has breached the Rs 90 per dollar mark. Malhotra also made the realistic announcement that the central bank would allow the domestic currency to find its correct market-determined level.</p>.<p class="bodytext">The RBI’s neutral stance marks a considered and calibrated shift from inflation control to growth support. Strong growth was observed across important sectors, including manufacturing and services, though the nominal GDP growth at 8.8% during the year’s first half was lower than the 10.1% projected in the Budget. Inflation is below the bank’s target and tolerance limit, and inflation forecasts do not indicate any serious uptick in the coming quarters. Industry has generally welcomed the cut as a measure that will help to boost credit off take, consumption, and investment. Working capital and investment loans will become cheaper, and it can help capital expenditure to pick up. It will be welcomed by borrowers too as home loans and other forms of retail credit will come cheaper. The RBI policy aligns with the government’s strategy of boosting consumer demand, which was seen in the decisions to cut income tax and GST rates.</p>.Private or government school? How parents in Karnataka decide.<p class="bodytext">Monetary easing alone cannot propel India into a higher growth orbit. Banks should be able to pass on the rates to the customers, and the government should support the new credit regime with fiscal discipline. The RBI has done well to announce measures to boost liquidity. While it has taken a positive stance, it is also cautious. It says that “there are some emerging signs of weakness in a few leading indicators” and uncertainties on the external front. Goods exports declined in October because of the high tariff regime. The central bank has projected growth to soften to 7% in the third quarter and 6.5% in the fourth quarter. Considering the adverse factors, the target of 7.3% for the whole year may be challenging.</p>
