Looking back at 2024

The overarching theme of this year has been the RBI's new approach to vigilance

- TAMAL BANDYOPADHYAY

As 2024 comes to a close, let's look back at how it has been for India's financial sector.

The policy rate remained unchanged at 6.5 per cent through the year. The last two meetings of the Reserve Bank of India's (RBI's) Monetary Policy Committee, in October and December, however, saw some action as the growth-inflation dynamics started changing. In October, the RBI changed the stance of the policy from "withdrawal of accommodation" to "neutral", and followed it up in December with a cut in banks' cash reserve ratio to release liquidity in the system.

Before we get into the trends of the year gone by, here are some data points to ponder over.

Consumer price index (CPI) inflation was 5.69 per cent in December 2023. In January 2024, it dropped to 5.10 per cent and by July, it dropped further to 3.6 per cent - the second lowest level in the last five years, and lower than the midpoint of RBI's flexible inflation target. However, driven by food prices, it rose to 6.2 per cent in October, its 14-month high, piercing the upper band on the target. In November, it was 5.47 per cent.

The GDP growth has progressively slowed. From 7.76 per cent in the March quarter, real GDP growth dropped to 6.5 per cent in the June quarter and 5.36 per cent in the September quarter - the third consecutive quarter of slower growth for the world's fastest growing major economy.

What about other metrics, which give us a sense of the Indian economy, banking and finance?

Well, the closing of the 10-year yield in 2023 was 7.17 per cent. Last Friday (December 20), it was 38 basis points lower, closing at 6.79 per cent. During the year, the yield rose to a maximum of 7.245 per cent (on April 22), and its lowest level was 6.65 per cent (December 16). One basis point is a hundredth of a percentage point. Yields and prices of bonds move in opposite directions.