IGI Logo

Below the Comments on RBI Holds Rates, Slashes CRR: A Balancing Act for Inflation and Growth by Dr. Vikas Gupta, CEO and Chief Investment Strategist, OmniScience Capital

“The Reserve Bank of India’s decision to maintain the repo rate at 6.5% for the eleventh consecutive meeting, coupled with a neutral policy stance, reflects a prudent approach to balancing inflation management with economic growth support. The 50-basis-point reduction in the Cash Reserve Ratio (CRR) is a strategically timed measure to ease liquidity constraints, injecting over Rs.1 trillion into the banking system. This move enhances banks’ capacity to extend credit and invigorates economic activity across sectors.

With inflation projections for FY25 revised to 4.8%, the RBI’s cautious outlook underscores its commitment to maintaining durable price stability while fostering sustainable growth. Notably, the real GDP growth forecast for FY25 has been revised downward from 7.2% to 6.6%, reflecting recent economic challenges. Headline CPI inflation spiked to 6.2% in October from 5.5% in September and sub-4% levels earlier in the fiscal year, driven by a sharp rise in food inflation and a modest uptick in core inflation.

Encouragingly, food inflation is expected to ease in Q4 FY25 as seasonal vegetable price reductions and kharif harvest arrivals bring relief. Meanwhile, the robust performance of private consumption and the services sector continues to underline the Indian economy’s resilience. Temporary headwinds, such as monsoonal disruptions and election-related factors, are anticipated to wane, paving the way for a recovery in the coming quarters.

For investors, this period presents an opportune moment to recalibrate strategies. Sectors with strong earnings visibility, manageable debt levels, and sustainable competitive advantages are likely to drive the next growth cycle. Diversified portfolios focused on emerging growth themes can capitalize on India’s medium- to long-term growth potential, which is underpinned by domestic economic resilience and favorable global trends.

The RBI’s policy adjustments, emphasizing stability and liquidity, position the economy and markets for sustained growth while providing a foundation for strategic, long-term investment opportunities.”

Above views are of the author and not of the website kindly read disclaimer