Thu Dec 05 14:29:55 UTC 2024: ## RBI Expected to Hold Repo Rate Steady Amidst Slowing Growth and Rising Inflation

**MUMBAI, INDIA** – As the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) prepares to announce its decision on the key interest rate on December 6th, economists predict the repo rate will remain unchanged at 6.50 percent. This decision comes despite calls for a rate cut to bolster India’s slowing economy.

India’s GDP growth slumped to a seven-quarter low of 5.4 percent in the July-September 2024 period, significantly lower than the RBI’s forecast of 7 percent. Slowing government spending, adverse weather conditions, and weakening urban consumption have all contributed to this deceleration, according to experts.

While slow growth typically warrants a rate cut, the RBI faces the challenge of rising inflation. Retail inflation hit a 14-month high of 6.21 percent in October 2024, primarily due to soaring food prices. This presents a delicate balancing act for the MPC, which is tasked with maintaining CPI inflation within a 2-6 percent range.

Instead of a rate cut, economists suggest the RBI may opt for liquidity management measures. A reduction in the Cash Reserve Ratio (CRR), the portion of deposits banks must hold with the RBI, could inject liquidity into the market and support lending. Other options include Open Market Operations (OMO) purchases to influence the yield curve. The RBI is also expected to revise its FY25 GDP growth projections downward.

This is the final MPC meeting chaired by RBI Governor Shaktikanta Das before his term ends on December 10th. His reappointment remains unconfirmed.

The differing viewpoints highlight the complexities facing the RBI. While some advocate for a rate cut to stimulate growth, others emphasize the need to prioritize price stability, particularly given the recent tightening of overnight rates. The final decision will likely reflect a careful balancing of these competing pressures. The impact on the markets is also anticipated to be considerable. Separately, Parliament passed the Bharatiya Vayuyan Vidheyak 2024, a significant update to India’s aviation laws.

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