Comment on RBI Credit Policy by Ms. Sakshi Gupta, Principal Economist - HDFC Bank

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RBI Policy Comment

Mumbai, December 06, 2024: The RBI opted for a wait and watch mode in todays’ policy, keeping its stance and policy rate unchanged as expected. The central bank successfully engineered a fine balance in its communication between the need to remain cautious on growth while achieving price stability. The growth forecast was revised down by 60bps to 6.6% while inflation was revised up to 4.8% for 2024-25. We expect GDP growth to average at 6.4% in FY25, with some pick-up in momentum in the second half of the year.

The more substantive announcement in today’s policy came in terms of the support for liquidity conditions through a CRR cut of 50bps, which is estimated to add INR 1.1 lakh crore of liquidity to the system. Banking system liquidity has come under pressure in recent days on account of tax outflows, foreign outflows and higher currency leakage. We expect the RBI to continue providing more “durable” support for liquidity through various measures including longer-duration fine tuning operations, Open Market Operations, and sterilising its FX interventions.

A February rate cut remains on the table, especially if growth momentum fails to pick-up meaningfully over the coming weeks. That said, a rise in global uncertainty and pressure on the rupee or domestic inflation could nudge the RBI to delay any rate cuts to the April policy – preferring prudence and patience over pre-emptive action.