The Reserve Bank of India (RBI) is likely to cut interest rates in April and June, according to Soumya Kanti Ghosh, Group Chief Economic Adviser at
State Bank of India (SBI). He pointed to the dovish tone in the RBI’s latest meeting minutes, suggesting that the central bank is shifting its focus to economic growth.
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Liquidity conditions in the banking system are improving, with an inflow of ₹87,000 crore expected by early March. However, Ghosh cautioned that liquidity trends depend on multiple factors, including government cash balances and RBI forex interventions.
He added that while the RBI’s expected dividend payout of ₹2.5-3 lakh crore in May could help ease liquidity deficits, deposit rates are unlikely to decrease immediately. Banks may take a few months to adjust rates, and if another rate cut occurs in June, deposit rate reductions may follow later.
Ghosh also discussed the impact of US tariffs on Indian exports. While India’s exports to the US contribute only 2% to its gross domestic product (GDP), the broader impact extends beyond direct trade volumes, he said.
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Factors such as China’s dominance in global commodity manufacturing, US import patterns, and India’s role in supply chains will determine the overall effect. Ghosh noted that if the US imposes a 20% tariff, Indian exports could decline by 3-3.5%, but the overall macroeconomic impact would remain limited.
While it is still unclear whether reduced Chinese exports due to tariffs will lead to inflationary or deflationary pressures, he warned that any disruptions in emerging economies could have broader implications for global economic stability.
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SBI projects India’s GDP growth rate to be 6.2-6.3% for the October-December 2024 quarter and 6.3% for the full year. Rural economic indicators, including real wage growth, fertiliser and tractor sales, and an increase in the area under rabi crop, signal a positive trend.
Capital expenditure by the central and state governments also saw an uptick in December. While RBI has forecasted a 6.6% GDP growth rate, Ghosh believes 6.3% is a more realistic projection, assuming no major revisions by the Central Statistics Office (CSO) on February 28.
For the full interview, watch the accompanying video
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