The subdued nominal GDP growth of 8.7% in the September quarter has raised expectations of a rate cut by the Reserve Bank of India in the December policy review. “Everybody is waiting for the RBI to reflect on the current inflation numbers,” Commerce minister Piyush Goyal said on Friday. The central bank is expected to meet for its bi-monthly policy review next week.
Speaking at an event here, Goyal said, “Inflation in the last 10 years has been the lowest decadal rate ever since Independence… this year (there) will be very low inflation. Of course, everybody is waiting for the RBI to reflect on the current inflation numbers I believe.”
Inflation-Growth Conundrum for the RBI MPC
Consumer price index based inflation in October hit a series low of 0.25% on favourable base and persistently low prices of vegetables and other food items.
Retail inflation has averaged 2.22% in H1FY26, much lower than the RBI’s medium-term target of 4%.
Analyst Forecasts vs. CEA’s View on Low Inflation
Upasana Bharadwaj, chief economist at Kotak Mahindra Bank said: “Despite the high real GDP growth (8.2%), we retain our expectations of 25bp of rate cut in the upcoming policy as inflation trajectory remains benign.” According to Radhika Rao, senior economist at DBS BANK, Singapore, the MPC faces a challenging act at the December rate review, with the mix of a strong growth print and record low inflation.
Chief Economic Adviser V Anantha Nageswaran, however, said while low inflation situations arising out of weak domestic demand will be a concern, such instances caused by bountiful production or excess supply etc, will be tolerable. “So, this is not a situation where the low inflation rates are reflective of weak aggregate demand,” he said.
