Smart GDP growth casts shadow over RBI’s December rate cut

The Reserve Bank of India’s (RBI's) Monetary Policy Committee (MPC) is widely expected to keep the policy rate unchanged on December 5, even asa sizable minority of economists argues that the space created by softening inflation and moderating nominal growth warrants another rate cut.

- Subhana Shaikh

A Mint poll of 13 economists shows nine expecting a pause, while four of them are anticipating a 25 basis points cut to 5.25%, underscoring how finely balanced the December decision is likely to be. (One basis point equals 0.01%.)

The divergence of views reflects a rare point for India’s macro economy with record-low inflation, surprisingly strong real gross domestic product (GDP) prints, weakening nominal GDP growth, and emerging external sector risks, all at once.

The MPC is scheduled to announce its policy decision after its December 3-5 meeting. The central bank is also expected to maintain its ‘neutral’ stance, which allows it to move in either direction.