Balancing Inflation and Growth: A Delicate Dance

In December, the RBI's Monetary Policy Committee, chaired by outgoing governor Shaktikanta Das, kept the repo rate unchanged to balance inflation and economic growth. This move addresses India's slowing GDP growth and rising inflation. Sanjay Malhotra will lead the next MPC meeting in February 2025.

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) recently opted to maintain the status quo on the repo rate, prioritizing a balance between inflation control and economic growth. Outgoing Governor Shaktikanta Das supported the decision, highlighting the critical need to manage inflation while fostering growth.

The committee's choice reflects the challenge posed by a recent slowdown in GDP growth, which fell to 5.4% in the July-September period, alongside increasing inflationary pressures and a weakening rupee. Das and three other MPC members voted for stability, with two members suggesting a rate cut.

RBI's move comes at a pivotal moment as Sanjay Malhotra takes over as governor, preparing to chair the next pivotal MPC meeting in February 2025. As the economy grapples with external and internal pressures, the cautious, calibrated approach aims to preserve gains in disinflation and keep options open for future policy adjustments.

(With inputs from agencies.)