Hindi English Translation || Editorial || Taking guard: On the RBI and growth concerns

Taking guard: On the RBI and growth concerns

The central bank’s price worries may be warranted but growth concerns are emerging

In a 5:1 majority verdict (निर्णय), the Reserve Bank of India’s Monetary Policy Committee (MPC), last week, decided to hold benchmark interest rate at 6.50%, the same level it has been since April 2023. One of the three newly inducted (सम्मिलित करना) external members in the panel pushed for a 25 basis points (0.25 percentage points) rate cut, perhaps citing the decline in the headline inflation rate below the RBI’s median target of 4% in July and August. However, the MPC termed this downward trajectory (प्रक्षेपवक्र) of inflation (मुद्रास्फीति) as slow and uneven, and expected this moderation (संयम) to reverse from September, as it has, to hit a nine-month high of 5.5%. The panel has not altered its 4.5% projection for retail (The sale of goods to the public in relatively small quantities for use or consumption rather than for resale) inflation and its GDP growth estimate of 7.2% through 2024-25, but has reworked the math. In the second quarter or Q2, it expected inflation to average 4.1% instead of 4.4%, but the September number takes it over 4.2%. In Q3, inflation is now expected to average higher at 4.8% from the MPC’s August estimate of 4.7%, before easing to 4.2% between January and March 2025. While the MPC has unanimously (सर्वसम्मति से) agreed on switching the monetary policy’s hawkish stance to ‘neutral’, going by these numbers, hopes of a rate cut at the next policy review in December remain slim, especially as the panel has reiterated (बार-बार दोहराना) that it remains “unambiguously (स्पष्ट रूप से)” focused on durably aligning inflation to the 4% mark.

While food inflation remains a worry, with vegetable prices spiking (अचानक वृद्धि) again, the central bank Governor Shaktikanta Das has also flagged that core inflation (excluding food and energy costs) has bottomed out. Global oil and metal prices are fresh headaches to fret about, along with the ever-looming threat of climate shocks. Perhaps, if these risks remain only on paper, it is plausible to expect a rate cut in February. It is instructive that the RBI Governor only made a tangential reference to the US Federal Reserve’s slashing (कटौती करना) of interest rates by a sharp 50 basis points last month as a “policy pivot”, indicating that domestic trends will determine the bank’s approach. But with the European Central Bank likely to cut interest rates too, and U.S. inflation dropping to a three-year low, prompting talk of another rate cut soon, the RBI may have to act faster. Notably, though it remains more bullish (आशावादी) than most agencies on India’s growth trajectory, there are clear signs of a cooling in economic activity in the first half of this year, with stuttering car sales reflecting weaker urban consumption and industrial output slipping into contraction in August. If the tide does not turn on this front, the MPC, that has vowed to keep supporting growth while reining in inflation, could have an unenviable dilemma on its hands in the coming months.

Courtesy: The Hindu

Important Word List With Meaning

1.Verdict (Noun)

Hindi Meaning - निर्णय
English Meaning - A decision or conclusion, especially a formal one given by a jury or judge.

2.Induct (Verb)

Hindi Meaning - सम्मिलित करना
English Meaning - To formally admit someone to a position or organization.

3.Trajectory (Noun)

Hindi Meaning - प्रक्षेप पथ, प्रक्षेपवक्र
English Meaning - The path followed by an object moving under the action of given forces.

4.Inflation (Noun)

Hindi Meaning - मुद्रास्फीति
English Meaning - A general increase in prices and fall in the purchasing value of money.

5.Moderation (Noun)

Hindi Meaning - संयम
English Meaning - The avoidance of excess or extremes, especially in behavior or political opinions.

6.Unanimously (Adverb)

Hindi Meaning - सर्वसम्मति से
English Meaning - With full agreement by all involved.

7.Reiterate (Verb)

Hindi Meaning - बार-बार दोहराना
English Meaning - To say something again, typically for emphasis or clarity.

8.Unambiguously (Adverb)

Hindi Meaning - स्पष्ट रूप से
English Meaning - In a clear and precise manner; without any doubt or confusion.

9.Spike (Noun)

Hindi Meaning - अचानक वृद्धि
English Meaning - A sharp increase in the amount or rate of something.

10.Bullish (Adjective)

Hindi Meaning - आशावादी
English Meaning - Optimistic or confident about the future, especially with reference to stock markets expecting rising prices.

11.Slash (Verb)

Hindi Meaning - कटौती करना
English Meaning - To reduce something, especially prices or costs, significantly.

12.Retail (Noun)

English Meaning - The sale of goods to the public in relatively small quantities for use or consumption rather than for resale.