NEW DELHI: A combination of monetary policy stance and macroprudential measures by the central bank, as well as structural factors, may have contributed to the slowdown in demand, a Treasury report on Thursday said, adding that between the North Block and the Reserve Bank is the latest sign of disagreement. India’s economic indicators (RBI) on growth and inflation. This is the ministry’s first official comment on the economic slowdown, and some of the blame seems to lie with the RBI.
Growth in the July-September period fell to 5.4%, the lowest level in seven quarters, putting pressure on the RBI to cut interest rates to revive growth, but the central bank remains focused on curbing inflation, with 11 cuts in December. I chose to keep interest rates unchanged. He cited persistent inflation. A slowdown in urban consumption is also worrying policymakers struggling to get growth back on track.
“…there is good reason to believe that the growth outlook for the second half of FY25 (H2) is better than that seen in the first half (H1). At the same time, structural factors may also play a role” in the economic slowdown in the second half of the year. “We should not rule out the possibility that it contributed,” the Ministry of Finance’s monthly economic report said, assessing the central bank’s move to lower the cash reserve ratio (CRR) from 4.5% to 4% at its December policy meeting. 2024.
The move should help boost credit growth, which slowed somewhat too quickly in the 2024/25 financial year, the report said. He also stressed that hiring and compensation practices in the corporate sector are also contributing to slowing consumption growth in urban areas.
There are hopes that the Reserve Bank of India may cut interest rates in February due to new monetary policy and new governor Sanjay Malhotra, a former revenue secretary who replaced Shaktikanta Das earlier this month. , some experts have said that February’s rate cut could be contrary to fiscal policy. The backdrop is global uncertainty.
Finance Minister Nirmala Sitharaman had earlier blamed the slowdown in government spending in the April-June quarter on the general election and expressed hope for a recovery from this quarter. The report asserted that growth would be 6.5% this year, but warned that new uncertainties were emerging on the world stage.
The report said: “Global trade growth is more uncertain than before. Rising stock markets remain a major risk. Emerging market currencies are under pressure due to a stronger US dollar and a rethinking of the trajectory of US policy rates. “They are exposed to it,” he said. Prepared by the Ministry of Economic Affairs. “As a result, monetary policymakers in these countries will think more deeply about the direction of policy rates. Recent exchange rate movements may be reducing freedom. Sustaining this will require a deeper commitment to growth from all economic actors.”
The report said inflationary pressures eased in November 2024 due to lower food and core inflation, and said the influx of fresh produce into the market eased pressure on vegetable prices.
