Finance Minister Nirmala Sitharaman, speaking at the 11th SBI Banking and Economics Conclave 2024, highlighted the challenges posed by high borrowing costs. She urged banks to make interest rates more affordable to enable industries to scale up and build capacities.
Currently, the Reserve Bank of India’s (RBI) repo rate stands at 6.50 percent and has remained unchanged for the last ten monetary policies. In its October policy, the RBI shifted its stance to “neutral” from “withdrawal of accommodation.”
Recently, Union Minister Piyush Goyal advocated for an interest rate cut, prompting RBI Governor Shaktikanta Das to humorously defer comments until the December monetary policy.
On inflation, Sitharaman noted that while core inflation numbers are below three to four percent, the volatility in perishable commodities like tomatoes, onions, and potatoes is driving up overall inflation. She emphasized the government’s efforts to enhance storage facilities for these goods to tackle cyclical supply issues.
India’s retail inflation climbed to a 14-month high of 6.2 percent in October, surpassing market expectations and breaching the RBI’s upper tolerance limit of 6 percent. This spike, driven by rising food prices, has led to speculation that the RBI may hold rates steady for the eleventh consecutive meeting in December.
RBI Governor Das acknowledged the recent uptick in the Consumer Price Index (CPI) but expressed optimism about a moderation in inflation trends moving forward.