Policy path forward: Balancing inflation control and growth revival

Despite the growth slowdown, a rate cut-cycle is unlikely to start anytime soon

After a spectacular average gross domestic product (GDP) growth rate of 8 per cent over the last three years, the economy slowed to its weakest growth in seven quarters, registering just 5.4 per cent in the second quarter. While an economic slowdown during the quarter was anticipated, its magnitude exceeded market expectations. Simultaneously, the inflation rate surged past the tolerance level of 6 per cent in October, driven by elevated food prices. 

 

The continued elevation in food prices has started spilling over into core prices. Despite the nudge from political quarters to start the rate reduction cycle, not surprisingly, the