Rate cut from RBI unlikely before the end of this year

As India has been growing well and GDP growth has not been suffering due to higher repo rate and as food inflation is still very high and still uncertain, RBI may not make a hurry in bringing down the repo rate

The pause stance on repo rate as well continuation of withdrawal of accommodation stance was expected from the market

RBI is particularly worried about the inflation of the food items which has a bearing of more than 46 per cent on headline inflation. The inflation at 5.1 for June is much above the target of 4 per cent set by RBI. RBI has also clearly stated that it is not advisable to seperate the food inflation from the headline inflation, as food inflation is very much affecting the consumers and the food inflation has also the trend of higher expectations of inflation amongst the public. RBI for the current year has estimated the headline inflation at 4.5 per cent which is still above the comfortable level of RBI. RBI has also stated that food inflation has to be controlled by supply side efforts of the government. RBI has maintained its growth projections at 7.2 per cent even though there were talk that the growth may be lowered in view of the global growth being suffered due to various uncertainties as well Economic Survey has projected growth of 6.5 to 7 per cent.

As India has been growing well and GDP growth has not been suffering due to higher repo rate and as food inflation is still very high and still uncertain, RBI may not make a hurry in bringing down the repo rate. Unless RBI gets full confidence of headline inflation is coming within the target of 4 per cent on sustainable and on durable basis, RBI bringing repo rate down is not expected and it is likely now either in the last quarter of this year or only in first quarter of 2025.

(The author is the former CMD of Indian Overeas Bank)