RBI Projections May Change For Inflation, GDP: Madan

Given the rather uncertain global environment and the possible impact on inflation and the fact that currently inflation has been averaging close to 5.9% in the last two months, a status quo on repo rate will be the logical outcome from the policy.

Madan Sabnavis, Chief Economist, Bank of Baroda

FinTech BizNews Service

Mumbai, 3 December, 2024:  The Reserve Bank of India (RBI) has scheduled its Monetary Policy Committee (MPC) meeting for December 4-6. Madan Sabnavis, Chief Economist, Bank of Baroda, has shared his policy expectations:

“Given the rather uncertain global environment and the possible impact on inflation and the fact that currently inflation has been averaging close to 5.9% in the last two months, a status quo on repo rate will be the logical outcome from the policy. There could be change in RBI projections for both inflation and GDP as inflation has been higher so far than the RBI forecast for Q3 and GDP growth is expected to be lower in Q2. It would hence be of interest to see what the projections this time are. While liquidity is tight presently, any measure to augment the same will be indicative of the RBI view on the permanency of this situation. We believe this is transient, but would tighten once again in December when the advance tax payments are due.”

Here are the key highlights from his quote:

1. Status Quo on Repo Rate:
   The uncertain global environment and recent inflation trends (averaging 5.9% in the last two months) suggest that the RBI is likely to maintain the current repo rate
2. Revised Projections Expected:
   • Inflation: Higher than RBI's forecast for Q3 so far
   • GDP: Growth is expected to be lower for Q2
     Any revisions in these projections will be closely watched
3. Liquidity Tightness:
   • Current liquidity conditions are tight
   • Measures to address this could indicate the RBI's stance on whether this situation is transient or more persistent
4. December Tightening Expected:
   Liquidity may tighten again in December due to advance tax payments