In the December 2024 meeting of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), external member Dr. Nagesh Kumar advocated for a 25-basis point reduction in the repo rate, suggesting a decrease from 6.5% to 6.25%. He argued that such a cut would stimulate economic growth without exacerbating inflation, which he anticipates may decline due to seasonal price corrections.
Source:- bbc news
Dr. Kumar also proposed a 50-basis point reduction in the Cash Reserve Ratio (CRR) to enhance liquidity in the banking system. He believes that lowering the repo rate would reduce business costs and encourage companies to invest, potentially initiating a positive cycle of wage growth and demand.
Despite Dr. Kumar’s recommendations, the majority of the MPC members voted to maintain the repo rate at 6.5% for the eleventh consecutive meeting, citing concerns over inflation and an uncertain growth outlook. The decision reflects a cautious approach, balancing the need to support economic growth while ensuring that inflation remains under control.
The MPC’s deliberations highlight the ongoing debate between fostering economic growth through monetary easing and maintaining price stability. While Dr. Kumar and another external member, Prof. Ram Singh, supported a rate cut to stimulate the economy, the prevailing sentiment within the committee favored a status quo, emphasizing vigilance in the face of inflationary pressures.
As the Indian economy navigates these challenges, the MPC’s future policy decisions will continue to weigh the dual objectives of promoting growth and controlling inflation, adapting to evolving economic indicators and forecasts.
Share your views in the comments
