RBI Monetary Policy: Governor Shaktikanta Das headed MPC hits a pause button yet again, keeping the repo rate unchanged at 6.5 per cent. He believes that strong foundations can be set for high growth only with durable price stability.
Addressing the MPC meeting today, Das said, "The MPC kept the stance unchanged to 'neutral'. The decisions were taken with a majority of 4:2 by the six-member rate-setting panel."
He said price stability is essential for the people, but growth is also important. Gradually, inflation is moving towards the targets after multi-decade high, the Governor said.
"CRR reduced from 4.5 per cent to 4 per cent, to be done in two tranches of 25 bps each. The CRR cut will help liquidity by Rs 1.16 lakh crore to the banking system," Das announced.
The central bank's MPC commenced its three-day meeting on December 4 (Wednesday). The last interest rate hike took place in February 2023.
Experts welcomed the RBI MPC's decision on repo rate, calling it a "balanced approach to manage India's growth and inflation rate".
"A steady rate ensures consistent repayment terms, which increases the confidence of homebuyers and encourages investments in the sector. With property prices rising, stable lending conditions and a steady market make real estate a key driver of economic growth," said Manju Yagnik, vice chairperson of Nahar Group and senior vice president of NAREDCO Maharashtra.
Vishal Jumani, Joint Managing Director, Supreme Universal said, "With steady interest rates, buyer confidence will likely increase, driving steady demand and supporting sector growth. Moreover, the positive correlation between tax relief measures and high-end property sales is expected to persist."
He stated that the combination of stable interest rates and reduced stamp duty will continue to drive sales of properties. This favourable environment will benefit both developers and homebuyers, ultimately fostering growth in the real estate sector, Jumani added.
The recent interest rate decision comes at a time when India's economic trajectory is witnessing speed bumps, which were quite visible in Q2 earnings.
GDP Performance Remains Below the Mark
The recent GDP figures were a major dampener to sentiments as the figure stood at 5.4 per cent, way below economist expectations. The figure was the lowest in nearly two years and marked a steep decline from the 8.1 per cent growth recorded in the same period last year. Even during the April-June quarter, the GSP figure stood at 6.7 per cent.
However, optimism remains intact for India's growth story as many view the speedbumps as temporary.
“I think in reacting to these numbers, I don’t think we should throw the baby out with the bathwater. Because the underlying growth story still remains very much intact,” Chief economic advisor V Anantha Nageswaran said during Assocham's Bharat@100 Summit.
"If you run through the checklist for the Indian economy, the health is pretty robust. Be it the external debt as the share of GDP, be it the non-performing assets in the banking system," he further added.
However, the CEA pointed out that the global outlook remains on a challenging path and mentioned the need to pull domestic levers to drive GDP growth.
