Indian CPI trends - Possible move by Reserve Bank of India(RBI)

India is said to be in a position where inflation has been increasing in recent times. It is said to be affecting the pricing of all the necessities of the citizens, ranging from food items such as cereals, vegetables, and meat. As per the current estimates of the consumer price index (CPI), it is said to be pegged at 3.65 percent as per the Ministry of Statistics and Program Implementation. This is said to be a marginal increase of 0.11 percent which is said to be 3.54 recorded for July 2024.

The rise in inflation is said to be driven by multiple factors. It is said to be driven by the manufacture of machinery & equipment, food articles, processed food products, and other manufacturing and textiles. This adding to the pressure of a weakened currency (Indian Rupee) and delayed monsoons in our country, adds up to be the primary contributing factors. This current inflation rate is significantly better considering that it was recorded at 6.83 percent same time last year.

However, the progress to control inflation is said to be on the right path, and we are said to be in the ballpark of under 4 percent. Now the central bank and its members need to take more steps to ensure some amount of stability in the Indian economy. This could be done by the apt timing of rate cut announcements in the coming months.

US Fed Rate cut and Indian central bank moves

The Federal Reserve has given us a surprising rate cut, a cut by 50 basis points which was a surprise by many of the major bankers and economies across the globe. The Fed chief Jerome Powell, seems to be confident enough not to see a recession and a slowdown in the coming months. With a clear majority from all the Fed board for a 50-bps cut except for a few with the proposal of a 25-bps cut, they seem to be pretty confident of their economic performance. With an anticipated growth in the economy in the coming months along with the inflation cooling as per the expected trends, they are pretty confident of the economy to be strong and closing the year on a high note. The central bank also anticipates another 50-70 bps cuts by the close of this year as per many of the prominent banks.

With the rate cuts in place, it is beneficial for India, as we can anticipate more foreign inflows. This paves the way for India to be once more one of the prominent destinations for investment. The potential areas for investment include IT, banking, real estate, and the consumer goods market.

It remains to be seen when the Reserve Bank of India will go in for a rate cut. The interest rates were said to be held at 6.5 percent and remain unchanged until this month (September). It remains to see if there is a rate cut in the meeting of October, considering the recent developments. But this would be largely determined by the long-term inflation pathway if there is a sense of cooling down. The best case for India to see a rate cut is in the first quarter of 2025.