A logo of the Reserve Bank of India (RBI) can be seen at the head office in Mumbai. | Photo credit: Reuters
The Treasury Department said on Thursday (Dec 26, 2024) that the “combination of monetary policy and central bank macroprudential measures may have contributed to the demand slowdown” in the economy – comments made two days after a ruling by the Reserve Bank of India come. RBI) monthly bulletin article called for urgent action to “debunk inflation” to give a stronger boost to consumption and investment.
Although the report said there are “good reasons to believe” that growth prospects in the second half of the year will be better than in April and September, when GDP rose 6%, Economic Department officials said: the ministry adjusted their growth. expectations for 2024-2025 at “around” 6.5%.
Until the end of October, the ministry’s monthly economic reports claimed growth would be between 6.5% and 7% this year. The latest analysis, published a month ago and days before the second quarter, showed that GDP rose to a seven-quarter low of 5.4%. There was silence on growth estimates, but cautious optimism was expressed about the economic prospects for the coming months.
The ministry’s latest review also said that credit growth had slowed “too much and too quickly” in India this year, and the RBI’s move to cut the cash reserve ratio to 4% from 4.5% in the December review of called monetary policy “too much, too fast.” good news that should help stimulate credit flows.
“Sustaining growth will require deeper involvement of all economic stakeholders in growth,” the November assessment underlined, citing new uncertainties clouding the 2025-2026 outlook. The comments take on significance at a time when the government is increasingly calling for the central bank to cut interest rates to stimulate investment and growth.
While global trade growth appears more uncertain than before, the survey noted that elevated stock markets remain a major risk. “The strength of the US dollar and a rethink of policy interest rates in the United States have put pressure on emerging market currencies. This will in turn prompt monetary policymakers in these countries to think more deeply about the evolution of policy interest rates. Recent exchange rate movements may have reduced their degrees of freedom,” the report said.
These factors will also weigh on the minds of Indian monetary policymakers, the ministry acknowledged. “India’s growth prospects for the coming years for the period 2025-2026 are clearly seen through the lens of India’s domestic economic fundamentals, but are also subject to new uncertainties,” the report points out.
While a “promising” Rabi crop ahead will help ease food inflation pressures during the year, and a downward trend in international crude oil prices should curb price increases, the ministry noted that high global edible oil prices and India’s heavy dependence on imported edible oil would warrant close monitoring to control inflation.
Published – Dec 26, 2024 9:49 PM IST
