Mumbai: The Reserve Bank of India (RBI) may bring good news in its upcoming December monetary policy meeting. According to a recent report, the central bank could cut the repo rate by 25 basis points, bringing it down to 5.25 percent. This means home loans and other loans could become cheaper. The main reason for this possible cut is the sharp fall in inflation across the country.
Inflation at Lowest Levels Since 2017
Inflation is now at one of the lowest levels in years. In September, the Consumer Price Index (CPI) inflation was just 1.5 percent, the lowest since June 2017. This is mostly because food prices have dropped sharply. Prices of vegetables, grains, and pulses have come down due to good crop production and strong food storage reserves.
GST Reforms and Good Monsoon Helped Lower Prices
Experts believe that recent GST reforms, along with heavy rains and good crop yield, helped bring down prices. In fact, after a short-term price rise due to heavy rains in August, vegetable prices fell again. This helped reduce the overall inflation pressure.
During the July–September quarter, the average inflation was 1.7 percent, slightly below the RBI’s estimate of 1.8 percent.
Relief Package for Exporters Likely
Along with the expected rate cut, the government may also announce a relief package for exporters, according to data compiled by HSBC. The aim is to boost economic growth through economic reforms and support for businesses.
Gold Prices Still High
One exception in the inflation trend is gold prices, which rose about 47 percent in September compared to last year. This rise alone added 50 basis points to the overall inflation rate.
Still, with food prices falling and cheaper imports from China, inflation is expected to stay low in the coming months—possibly below 1 percent in October.
