RBI may also cut interest rates after the recent 50 basis point cut by the US Federal Reserve but not this year. The possibility that RBI will reduce the report rate by February 2025 has been expressed in SBI's research. In August 2024, CPI inflation in the country stood at a five-year low of 3.65%. A rate cut in calendar year 2024 is unlikely. Early 2025 can be said to be the best time for ratecut. As the government's cash balance is moving out of the banking system, liquidity related challenges may prevail in the banking sector in the near future as well.
Despite the projected increase in inflation in September and October, CPI inflation is likely to remain below 5% in the coming months. Average inflation is likely to remain in the range of 4.6% to 4.7% throughout FY 2024-25. Which will be between RBI's target of 4-6%. 7% more rain has been recorded this year due to favorable monsoon. This led to an increase in Kharif crop cultivation to 109.7 million hectares, higher than the five-year average.
As of September 17, Kharif crop sowing was 0.1% higher and 2.2% higher than last year. While paddy cultivation also increased by 2.1% with 41 million hectares. Which is higher than the five year average. In terms of monetary policy, the RBI has kept the liquidity position appropriate to keep inflationary pressures under control.
The government's cash balance stood at Rs 2.8 lakh crore, while the durable/core liquidity surplus increased to Rs 3.19 lakh crore as of September 18, 2024, compared to an average of Rs 3.9 lakh crore during the previous monetary policy.
RBI estimates GDP growth at 7.2% in 2024-25 The RBI has projected an economic growth of 7.2% for the year 2024-25 during the last monetary policy meeting. In which the economic growth rate of 7.1% for the first quarter, 7.2% for the second quarter, 7.3% for the third quarter and 7.2% for the fourth quarter has been expressed.
Image Credit: (Divya-Bhaskar): Images/graphics belong to (Divya-Bhaskar).
