Easing inflation will indeed give boost to economic growth.

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CPI clocked to 3.34% in March after 6.1% in February, even below the consensus estimate of 3.46%. This was the lowest inflation recorded since August 2019. Wholesale inflation also fell to a six-month low at 2.05% in March. This was the lowest for retail inflation indeed. Can this be a time when the government, together with fiscal policy, and the central bank with the monetary policy, hit the sweet spot?

The headline GDP growth rate was at 6.3%, which is amongst the highest among the leading nations. Real GDP growth also clocked at 9.7%. RBI is taking many proactive steps to boost growth at this time. A part of the discussion is that the RBI has already cut repo rates by 25 bps, and there are skeptics hovering around that the RBI may further reduce the rate by 50 bps each in the months of June and August. This move by the RBI not only depicts clear mindsets but also the potential leverage they are trying to apply during this time of global turbulence in the geoeconomy. Easing in the repo rates will leave banks and retail lenders with more money to lend to businesses and other loan instruments. Home loans will come down, new enterprises will open, and new opportunities will be created in the market.

All the stakeholders that are linked by the decision may see a bull run in the market as this stance of the RBI will inject more money into the economy.

Now the central government, in this movement, has to come into play — providing ventures with proper infrastructures to ensure the flourishing of business in the market.

Indian businesses are also concerned about the tariffs that are imposed by the US, but there may be minimal effect on exports because, in reference to neighbouring exporters to the US, India is on the lower side of the retaliatory tariffs that are being imposed by the US. Although exports will be impacted, it won’t be to a significant extent. The Ministry of Commerce in turn has become active not only to balance the impact but also to make efforts to place Indian traders in a better position.

IMD has also predicted that the Indian subcontinent will experience above-average rainfall this year, so in the market, there will be more food available, which in turn will help in cooling off prices — making a leeway for the RBI to cut rates even further, which will certainly help in increasing the growth trajectory of India. Though there are headwinds due to global turbulence and investments have not picked up the way the government would have liked, even during such instances, the Indian economy is performing better than others. Now, all eyes are on the central entities — how they balance the harmony between fiscal and monetary policy to take the economy even further.


#inflation #rbi #fiscal #monetary #economicgrowth #rainfall #policy

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