The Economic Survey for the previous (ongoing) fiscal year and the Budget for the upcoming fiscal year have been presented. The Budget was presented by the Union Finance Minister Nirmala Sitharaman on February 1, 2025.
The Budget was largely focused on consumption. The budget through changes in the tax regime has tried to put money in the hands of the people.
All Eyes On RBI
Now that the budget is all done and dusted, all eyes and focus are now squarely on the central bank of the country, the government’s banker, the Reserve Bank of India. The country’s banker is slated to hold its bi-monthly Monetary Policy Meeting MPC between February 5 and February 7.
The result of the MPC meeting will be announced on February 7 by RBI governor, Sanjay Malhotra.
This would be the first MPC meeting since the change of guards at the RBI. The new RBI governor, Sanjay Malhotra, who took charge from former Shaktikanta Das, will preside over his first MPC.
Will There Be a Rate Cut?
A rate cut is something all stakeholders across the board may it be businesses, equity markets, and even the government, are looking forwards to.
This would be the first MPC meeting since the change of guards at the RBI. The new RBI governor, Sanjay Malhotra, who took charge from former Shaktikanta Das will preside over his first MPC.
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In the last MPC meeting held on December 6, the RBI, then headed by Das, decided to hold on to its repo rate of 6.50 per cent.
The RBI has not induced a change in interest rates since February 2023, in nearly two years.
The MSF or Marginal Standing Facility, remained at 6.75 per cent. The SDF, or Standing Deposit Facility, remained at 6.25 per cent.
A lower interest rate would further help the market with better liquidity, as borrowing costs go down. Previously, while retaining the interest rate, the RBI however did cut the Cash Reserve Ratio or CRR.
Conditions Apply
A cut in interest rates would fall line in with the expectations of the economic survey, which asked for greater space for business to grow and focused on deregulation. A smaller repo rate would further facilitate the fiscal mobility of businesses.
The MPC comes at the back of the US Fed’s FOMC that was held last month. The US Fed under Jerome Powell chose to retain its interest rates at 4.50 per cent.
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This also comes at a time, when India’s inflation rate has wavered in the recent past, remaining outside RBI’s threshold of 4 per cent. India’s growth rate also dropped in the previous quarter. Meanwhile, the Indian equity markets have also suffered in the recent week and months.
The MPC comes at the back of the US Fed’s FOMC that was held last month. The US Fed under Jerome Powell chose to retain its interest rates at 4.50 per cent.
Although conditions are appropriate for a rate cut in India, it remains to be seen whether RBI uses the scissors or keeps them aside like the US Fed.
