RBI Could Signal Scope For Rate Cuts In 2024-25

An early policy pivot is unlikely under near-term price pressures, but a shift in policy stance could set the stage for rate cuts next year-ideally in sync with a private investment revival

Tighter fiscal control than expected by the government has given India's central bank one less reason to worry as it meets this week to review monetary policy. With the Centre's deficit projected to move faster down its glide path, the likelihood of spending-driven price pressures upsetting the Reserve Bank of India's (RBI) apple cart has fallen a bit. The budget has pegged the central deficit in 2023-24 at 5.8% of GDP, lower than estimated initially. Further tightening to 5.1% has been pencilled in for 2024-25, before it is shrunk to under 4.5% the following year. Looser purse strings could have made RBI wary of a premature policy pivot. But with state spending kept in better check, the central bank would be assured of a fiscal policy favourable to its job.