GIPE
Pune: The benefits of RBI’s cumulative 125-basis-point (1.25%) repo rate cut since Feb last year had not yet fully reached borrowers and depositors, fifth GIPE Shadow Monetary Policy Committee (GSMPC)’s report released on Monday stated. Fresh loans and deposit rates are still adjusting to the 125-bps reduction, leaving room for previous cuts to continue filtering through the economy,” committee chairperson Shreya Chopra said. The student-led panel, which simulates the Reserve Bank of India ’s monetary policy process, recommended that the repo rate be kept unchanged at 5.25% and the policy stance remain neutral ahead of next month’s RBI review.
The committee said economic growth remained healthy, while the recent rise in inflation had been driven mainly by food and fuel costs rather than excess demand. Researchers Arshi Saina and Chaitanya Anand said the rise in inflation was largely supply-driven. “Higher interest rates would do little to address shortages or rising input costs, while potentially slowing economic growth,” they said. Chopra said monetary policy must strike a balance between inflation control and growth. Wait too long and temporary increases in food and fuel prices could spread into broader inflation,” she said. “The GIPE Shadow Monetary Policy Committee gives students the opportunity to engage with real-time economic developments, listen to different perspectives, deliberate and experience the challenges involved in making a monetary policy decision,” GIPE VC Umakant Dash said.
It warned that a renewed rise in food and crude oil prices posed fresh risks to household budgets. “The rate cuts are reaching borrowers, but the full benefit has not yet reached everyone. Different loan categories are linked to different benchmark systems and reset cycles, slowing transmission. It, however, flagged mounting risks from rising crude oil prices, geopolitical tensions in West Asia, firmer global interest rates and pressure on the rupee. The panel will soon submit its recommendations to Union govt. “Act too quickly and growth could suffer.