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Time of India
a day ago
- Business
- Time of India
Further repo rate cut is imminent on June 8, 2025
Dr Rao is currently teaching risk management in the institute of Insurance and Risk Management (IIRM). A career banker with Bank of Baroda, he held the position of General Manager - Strategic Planning, Later was Associate Professor with National Institute of Bank Management (NIBM) and was Director, National Institute of Banking Studies and Corporate Management (NIBSCOM). He writes for financial dailies on Banking and Finance and his work can be viewed in the public academic accomplishments include Ph.d in commerce from Banaras Hindu University (BHU), MBA ( Finance), LLB. He runs a Youtube channel - Bank on Me - Knowledge series He likes to share his perspectives with next generation potential leaders of the banking industry. His book on "Transformation of Public Sector Banks in India' was published in september 2019. His most interesting work is in blog. LESS ... MORE In the backdrop of the economy's multidimensional resilience growing at 6.5 percent in FY25, in line with RBI expectations, and inflation expected to stay below the 4 percent mark, there is general buoyancy in markets. This is despite tense geopolitical risks, ongoing border unrest, and the US changing the tariff gears, arbitrarily increasing uncertainty. GDP growth is supported by corresponding GVA growth during FY25 at 6.4 percent, though it dropped from 8.6 percent in FY24 in sync with the then-GDP. Among the important drivers of monetary policy, the inflation and growth trajectories are key factors influencing the policy actions. The annual inflation rate fell to 3.16 percent in April 2025, down from 3.34 percent recorded in March 2025. April inflation is firmly below the market expectations of 3.3 percent. RBI at its bi-monthly policy meeting in April, projected CPI-based inflation for the current fiscal FY26 at 4 per cent, assuming a normal monsoon. Notably, inflation in the April–June quarter (Q1) is expected to dip as low as 3.6 per cent, revised sharply down from an earlier estimate of 4.5 per cent. Food prices, which account for nearly half of the consumer price basket, rose only 1.78 percent, the least since October 2021, and down from 2.69 percent in March. Even WPI averaged 2.3 percent, subscribing to the receding trend. Prospects of the economy: The agriculture sector is expected to rebound to a growth of 3.8 per cent in FY25. The industrial sector is estimated to grow by 6.2 per cent in FY25. Strong growth rates in construction activities and electricity, gas, water supply, and other utility services are expected to support industrial expansion. On a yearly basis services sector grew by 7.2 per cent in FY25 as against 9.0 per cent in FY24. The manufacturing sector has always been a cause of concern. Its HSBC India Manufacturing PMI was down to 57.6 in May 2025 from 58.2 in April. Service sector PMI clocks 58.2 in April, a notch lower than 58.5 recorded in March 2025. RBI projections of GDP for FY26 are 6.5 percent, and inflation is expected to be 4 percent. IMF expects GDP to grow at 6.2 percent while the World Bank expects India to grow at 6.3 percent in is more optimistic about the GDP of India growing at 6.4 percent in FY26. According to the IMF, India is still known to be the fastest-growing large economy, which is now the 4th largest economy, surpassing Japan and a notch below Germany. External Sector: In an interconnected financial system, it is necessary to understand the linkages of the domestic economy with the rest of the world. RBI has been cutting rates since February 2025, while the US Federal Reserve has held the federal funds rate steady in a range of 4.25 percent to 4.50 percent in the last 3 FOMC meetings since December 2024, after lowering it by one percent. The last mile disinflation journey was tough, and US inflation reached 2.1 percent in April 2025, close to its target of two percent. UK inflation shot back to 3.5 percent in April 2025, up from 2.6 percent in March 2025. It may prompt the Bank of England to keep the rates steady until the inflation drops. ECB too began rate cuts in June 2024 and has been giving priority to price stability. Its inflation is at 2.2 percent in April against a target of 2 percent. On 17th April 2025, it had cut rates by 25 basis points, which was effective from 23 April 2025. Way forward: Notably, the GDP of 6.5 percent in FY25 is below 9.2 percent in FY24 and 7.6 percent in FY23. Since the upside risks to inflation cannot be ruled out due to the sensitivity of food inflation, a close to 50 percent weightage in the basket. Balancing growth–inflation dynamics will need a lot of forward data and market intelligence inputs to find a common ground. But given the potentiality of the economy to be unleashed, thrust on growth and balancing it well with inflation will call for a further rate cut in the upcoming monetary policy review. Having already cut the repo rate by 50 basis points by bringing it down to 6 percent, going by the macroeconomic developments, another 25-basis-point repo rate cut is imminent. There are, of course, bullish views that the RBI may be aggressive in going for a 50-basis-point rate cut, which may not look realistic. The external sector dynamics amid tariff tussle and geopolitical risks could pose unanticipated risks. RBI has changed the stance of monetary policy in April to 'accommodative' and is providing adequate liquidity from time to time to ensure efficient and quick transmission of policy rates. It has injected Rs. 6.6 lakh crore into the system by using tools like open market operations (OMO), variable rate repo (VRR) auctions, and dollar-rupee swaps to inject liquidity in the banking system. Despite adequate liquidity, bank credit growth moderated to 11.2 percent in April 2025, a decrease from the 15.3 percent growth seen in the same period the previous year. This slowdown was observed across various sectors, including retail loans, personal loans, and industry credit. However, certain sectors like loans against jewelry and renewable energy experienced substantial growth. The latest RBI guidelines on Gold Loans should be able to enable better risk management as the loan-to-value (LTV) ratio is fixed at 75 percent. Though the near-term impact for some of the NBFCs could be challenging but in the long run, it will be inculcating a better credit risk culture. The new LCR norms are now made effective from April 1, 2026, providing enough time for banks to plan the structural liquidity pattern. Banks should focus on finding ways to increase the flow of credit to productive sectors of the economy, with a focus on manufacturing, particularly to MSMEs. The impending lower interest rate regime should help banks to raise funds at a lower cost that can be passed on to borrowers to push the credit growth and stimulate the economy. All pointers are signifying the imminent rate cut of 25 basis points now unless the RBI goes aggressive to opt for a 50 basis points. A calibrated reduction of interest rates is desirable to enable efficient transmission of rates and provide latitude to markets to adjust their cost dynamics. However,, a low-interest rate regime is a welcome recipe for growth. Facebook Twitter Linkedin Email Disclaimer Views expressed above are the author's own.
Time of India
3 days ago
- Business
- Time of India
RBI likely to cut repo rate by 25 bps on June 6 amid low inflation, say experts
NEW DELHI: The Reserve Bank of India (RBI) is likely to announce a third consecutive 25 basis points (bps) rate cut on June 6, amid easing inflation and global economic uncertainty driven by US tariff actions. With consumer price inflation remaining below the 4 per cent median target, experts believe the move would support growth during a period of external volatility, according to a PTI report. The Monetary Policy Committee (MPC), the RBI's rate-setting panel, will begin deliberations on the next bi-monthly policy on June 4. The decision is scheduled to be announced on Friday, June 6. Following 25 bps repo rate cuts in both February and April, which brought the key policy rate down to 6 per cent, the six-member MPC, led by RBI Governor Sanjay Malhotra, also changed its policy stance from 'neutral' to 'accommodative' in April. The central bank has now reduced the policy repo rate by a cumulative 50 bps in 2025 so far, prompting multiple banks to lower their External Benchmark Lending Rates (EBLRs) and Marginal Cost of Funds-Based Lending Rates (MCLR). "We do believe that given the rather benign inflation conditions and the liquidity situation which has been made very comfortable through various measures of the RBI, the MPC would go in for a 25 bps cut in the repo rate on the (June) 6th. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Giao dịch vàng CFDs với sàn môi giới tin cậy IC Markets Tìm hiểu thêm Undo The commentary on both growth and inflation will be important as there are expectations of revisions in their forecasts for both the parameters," said Madan Sabnavis, chief economist, Bank of Baroda. He also expects the RBI to provide detailed insight into global factors affecting the Indian economy, especially in light of the expiration of US tariff relief in July. ICRA's chief economist, Aditi Nayar, also projects continued monetary easing through the year, as CPI inflation is forecast to remain below 4 per cent for most of the fiscal. "A 25 bps rate cut is expected next week, followed by two more cuts over the subsequent two policy reviews, taking the repo rate to 5.25 per cent by the end of the cycle," she said. The RBI's annual report, released on Thursday reiterated the central bank's plan to manage liquidity operations in line with the prevailing monetary policy stance, ensuring sufficient liquidity for the productive sectors of the economy. The government has mandated the RBI to maintain CPI-based retail inflation at 4 per cent, with a flexibility band of plus or minus 2 per cent. Assocham Secretary General Manish Singhal also supported the case for easing, citing multi-year low inflation and overall positive macroeconomic indicators. "Though the INR is likely to come under depreciation pressure in the short term, especially if global interest rates (e.g. in the US) remain elevated, its impact will depend on the changes in global risk appetite, crude oil prices and the Fed's own monetary stance. We emphasize the importance of strategic patience over aggressive easing, given the current environment of steady growth and manageable inflation," said Singhal. Echoing similar sentiments, Signature Global founder and chairman Pradeep Aggarwal expressed hope that the RBI would offer relief to homebuyers with a rate cut. "Given that several scheduled commercial banks have been reducing their lending rates following the previous two RBI MPC outcomes, another rate cut at this juncture would act as a catalyst for increased housing demand across segments. As a result, both first-time homebuyers and investors are likely to be encouraged to enter the real estate market, further strengthening demand across the sector," Aggarwal said. Also read: RBI slaps Rs 54.78 crore in penalties on banks and NBFCs for compliance lapses in FY25 An article in the RBI's May Bulletin highlighted that domestic bond yields have declined to multi-year lows, aided by back-to-back policy rate cuts and liquidity-enhancing measures. The report noted that monetary and credit conditions are evolving in line with the RBI's accommodative policy approach, aiming to bring inflation in line with targets while bolstering growth. India's GDP growth is estimated to have dipped to a four-year low of 6.5 per cent in FY 2024–25. Meanwhile, retail inflation in April 2025 eased to 3.16 per cent- the lowest year-on-year print since July 2019. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
India Today
13-05-2025
- Business
- India Today
Retail inflation declines to 6-year low of 3.16% in April
Retail inflation hit a six-year low of 3.16% in April 2025, down from 3.34% in March, mainly due to lower prices of everyday items like vegetables, fruits, pulses, and other protein-rich foods, reported means the overall rise in prices, measured by the Consumer Price Index (CPI), has slowed down when compared to April last year. The CPI-based inflation stood at 3.34% in March 2025 and 4.83% in April 2024, reflecting a steady easing of inflation. The last time it was this low was in July 2019, at 3.15%.advertisementFood inflation came down as well. It was just 1.78% in April 2025, much lower than 2.69% in March and far below the 8.7% recorded in April 2024. This means prices of food items are rising much slower than before, giving some relief to households. This is a developing story. It will be updated.
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Business Standard
13-05-2025
- Business
- Business Standard
India's retail inflation eases to 3.16% in April; lowest since July 2019
India's retail inflation dropped to its lowest level since July 2019, with the year-on-year Consumer Price Index (CPI) for April 2025 recorded at 3.16 per cent, according to data released by the Ministry of Statistics and Programme Implementation on Tuesday. The April figure reflects a decline of 0.18 percentage points from March's 3.34 per cent, marking a steady easing of prices. CPI-based inflation has now stayed below the Reserve Bank of India's medium-term target of 4 per cent for the third consecutive month. Robust harvest despite intense heatwaves drove down food costs, which account for nearly half of the consumer price basket. Food prices lowest since October 2021 The Consumer Food Price Index (CFPI), which tracks inflation in food items, showed a sharp decrease to 1.78 per cent in April 2025, down from 2.69 per cent in March. This is the lowest food inflation rate recorded since October 2021. The fall in food inflation is attributed to price declines in key categories such as vegetables, pulses, fruits, meat and fish, cereals, and personal care items. April retail inflation: Rural vs urban In rural India, headline inflation dropped to 2.92 per cent in April from 3.25 per cent in March. Urban areas also saw a dip, with inflation falling to 3.36 per cent from 3.43 per cent in the same period. The overall combined CPI index rose marginally to 192.6 in April from 192.0 in March. Rural areas experienced a food inflation of 1.85 per cent, while urban areas saw a slightly lower figure of 1.64 per cent. Housing: Urban housing inflation stood at 3.00 per cent, slightly down from 3.03 per cent in March. Education: Inflation in education services rose to 4.13 per cent from 3.98 per cent. Health: Health-related inflation remained nearly flat at 4.25 per cent, compared to 4.26 per cent in March. Transport and communication: Inflation rose to 3.73 per cent, up from 3.36 per cent the previous month. Fuel and light: Inflation rose to 2.92 per cent from 1.42 per cent. April retail inflation: Kerala saw highest, Telangana lowest Kerala recorded the highest combined year-on-year inflation rate at 5.94 per cent, followed by Karnataka (4.26 per cent), Jammu & Kashmir (4.25 per cent), Punjab (4.09 per cent), and Tamil Nadu (3.41 per cent). Telangana reported the lowest at 1.26 per cent. India's wholesale price index (WPI)-based inflation for April 2025 will be released on Wednesday, May 14. RBI FY26 inflation forecast At its bi-monthly policy meeting in April, the RBI projected CPI-based inflation for the current financial year (FY26) at 4 per cent, assuming a normal monsoon. Notably, inflation in the April–June quarter (Q1) is expected to dip as low as 3.6 per cent, revised sharply down from an earlier estimate of 4.5 per cent. Retail inflation cooled to a seven-month low of 3.61 per cent in February 2025, slipping below the RBI's medium-term target of 4 per cent for the first time since August 2024 and has steadily declined in the subsequent two months. RBI's quarter-wise CPI inflation forecasts for FY26 are as follows: FY26 Q1: 3.6 per cent FY26 Q2: 3.9 per cent FY26 Q3: 3.8 per cent FY26 Q4: 4.4 per cent A Reuters poll conducted in March also expects average inflation to hover around 4 per cent for the year. RBI MPC repo rate cuts The RBI's Monetary Policy Committee (MPC) unanimously voted to cut the repo rate by 25 basis points to 6 per cent and shifted its policy stance to 'accommodative', signalling room for further rate reductions. The next meeting of the RBI's MPC is scheduled for June 4–6. CPI data for May 2025 will be released on June 12, 2025.
