Shaktikanta Das News / How will Shaktikanta Das fulfill the hopes of those who pay EMI?

Shaktikanta Das News: The meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has started on November 4, and its decisions will be announced by RBI Governor Shaktikanta Das on November 6. This meeting is taking place amid the challenges of the Indian economy, where balancing inflation and economic slowdown is a difficult task.

Double pressure of inflation and economic slowdown

Retail inflation figures exceeded the RBI's tolerance level during September and October 2023. Inflation stood at 6.2% in October, the highest in the last one year. In contrast, GDP growth declined to 5.4% in the second quarter, the lowest in two years.

Despite a decline in manufacturing and private investment and marginal growth in the agricultural sector, overall economic activity is under pressure. This situation is raising questions about the effectiveness of the current monetary policy of RBI.

Demand for repo rate cut

The RBI has kept the repo rate stable at 6.5% since February 2023. However, despite rising inflation, economists and political leaders are now demanding a cut in interest rates. Union Commerce Minister Piyush Goyal and Finance Minister Nirmala Sitharaman have also supported a rate cut.

Analysts believe that a cut in interest rates can boost economic activity. Despite this, RBI Governor Das seems reluctant to cut rates, seeing inflation as a major challenge.

Liquidity and CRR issue

Recently, the liquidity crunch in the banking system has posed new challenges for the RBI. GST outflows, the rupee's fall against the US dollar, and the rising cost of overnight borrowing have aggravated this problem.

Experts suggest that the RBI can address this problem through phased cash reserve ratio (CRR) cuts or open market operations (OMOs). A 25 basis point cut in CRR can inject Rs 1.15 lakh crore of liquidity into the banking system.

Future direction: What can be the decision?

Experts are divided on what to expect from the RBI meeting. Some analysts believe that the possibility of a repo rate cut in December is limited. Inflation figures remain under pressure, but a fall in GDP has increased pressure for a rate cut.

A "dovish hold" approach, where the RBI keeps rates steady while hinting at a future cut, looks more likely. Radhika Rao of DBS Bank said a rate cut is more likely in the February 2024 meeting, but given the recent economic data, the MPC could take a major decision in this meeting as well.

Conclusion: The challenge is to strike a balance

For the RBI, this meeting will not only set the guidelines for monetary policy, but will also indicate how the bank strikes a balance between inflation and economic slowdown. Will Governor Das take the risk of cutting rates, or give priority to controlling inflation? The answer will be known on November 6.

This decision will also be important for the common man, as changes in interest rates have a direct impact on loans and savings. This decision will determine the direction of the Indian economy in the coming months.