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    BusinessRBI Expert Expects Two Years of Lower Growth to Bring Down Stubborn...

    RBI Expert Expects Two Years of Lower Growth to Bring Down Stubborn Inflation

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    RBI Panel Member Expects Growth Sacrifice in 2024-25 to Bring Down Inflation

    A member of the Reserve Bank of 's monetary policy committee, Jayanth R. Varma, has indicated that India may have to bear lower economic growth in 2024-25 in order to successfully control inflation. In an interview, Varma, who is a professor of and accounting at IIM Ahmedabad, noted the RBI's projection of 7.2% GDP growth for the next fiscal year is weaker than the country's true potential.

    Varma feels restricting monetary policy in the pursuit of inflation will likely result in a growth reduction of around 0.75-1% over the next two years instead of just one year. He pointed out that inflation expectations have stabilized, so there is no need to excessively tighten rates and hurt growth. The 25 basis point repo rate cut proposed by Varma at the latest MPC meeting would still maintain a tight monetary stance.

    On inflation risks from high food prices and uneven monsoon rains, Varma believes any food price spikes will be short-lived based on past trends. He is also hopeful that a normal monsoon will prevent sustained food inflation. Varma underlined the importance of monitoring real interest rates rather than just repo rates given the declining inflation scenario.

    When asked about credit growth picking up despite high rates, Varma explained the Indian is yet to recover fully from the pandemic impact. He stressed the need to reach pre-Covid potential GDP levels through more policy support over the next few quarters. Overall, Varma feels RBI should balance growth and inflation concerns more judiciously going forward to maximize economic rebuilding.

    Northlines
    Northlines
    The Northlines is an independent source on the Web for news, facts and figures relating to Jammu, Kashmir and Ladakh and its neighbourhood.

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