RBI’s Unusual Move: 7% GDP Growth and Possible Rate Cut
The Reserve Bank of India (RBI) has projected a strong GDP growth of over 7% for the financial year 2024-25. A recent report by the State Bank of India (SBI) highlights that historically, a rate cut during such high growth is rare both in India and globally. This raises the question of whether the RBI is preparing for a rate cut despite the strong economic momentum.
The SBI report notes that a 7% growth with a rate cut has never happened in India’s or world history, except briefly in 2016 when a new Monetary Policy Committee took over. Typically, rate cuts occur when economic growth slows, not when it accelerates. The report points out that, unlike other countries, India’s projected growth remains robust, making a rate cut unusual.
The RBI may be strategically giving markets time to prepare for a shift in monetary policy. The central bank is signaling its close watch on growth and inflation dynamics, hinting at future policy changes. RBI Governor Shaktikanta Das announced that real GDP growth for 2024-25 is projected at 7.2%, with balanced risks.
Doubts Revealed
RBI -: RBI stands for the Reserve Bank of India. It is the central bank of India, which means it manages the country’s money supply and interest rates.
GDP -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country in a year. It helps to measure how well a country’s economy is doing.
Rate Cut -: A rate cut means the central bank, like the RBI, lowers the interest rates. This can make borrowing money cheaper, encouraging people and businesses to spend more.
SBI -: SBI stands for State Bank of India. It is one of the largest banks in India and provides various financial services to people and businesses.
Shaktikanta Das -: Shaktikanta Das is the Governor of the Reserve Bank of India. He is responsible for making important decisions about India’s monetary policy.
Inflation -: Inflation is when the prices of goods and services increase over time. It means you need more money to buy the same things as before.
