Highlights of the December 2024 meeting- Reserve Bank of India

The much-awaited decision from the Reserve Bank of India governor was much anticipated by many business houses and economists across the country. Though the anticipation of a cut was expected by major economists, the decisions came out otherwise.

Key pointers….

With the meeting for December concluded, the key highlight was that the governor and its members maintained a neutral stance at the rate of 6.5 percent. This is the 11th straight meeting the RBI kept the same stance. The meeting also argued the fact that inflation remains to be one of the ‘difficult’ fights, the governor still feels the fight to tame it to the target remains to be ongoing. With inflation showing an upward trend of peaking at 6.2 percent, the hope for the winter cropping season to go smoothly with stable rainfall shows some cooling effect for the Q4 forecasts.

The RBI however cut the CRR rate by 50 bps (4 percent), to improve liquidity in the economy. This would encourage various sectors, including the real estate sector which could see some revival in demand. This in general would promote a free flow of cash in the economy and also improve the demand side of the economy.

Considering the overall scenario of growth the projection of GDP for 2025 is said to be downgraded by the RBI. This is considering the inflation spikes during the year, which were not controlled due to various factors. Though the governor states the economy is resilient, the MPC members of the committee are said to be monitoring the scenario more closely before revising their forecasts on GDP for 2025. For now, the growth projected for the end of 2024 is pegged at 6.6 percent, and 6.9 percent for the first quarter of 2025.

Prospects of 2025

Currently, we can only anticipate growth, with a stable interest rate stance, ensuring growth inflation balance in the upcoming meetings. A cut in interest rate is pretty much essential to guarantee some amount of growth is realized, and as per experts, we can anticipate the same in February 2025. The recent meeting looks like a temporary relief to the economy. The hope for inflation to come in target and go in for an interest rate cut, is the best-case scenario to get the economy back on track.