Nomura predicts RBI will lower repo rates and CRR on Dec 6 to stimulate India’s slowing economy and enhance liquidity
Nomura, a leading financial services group, expects RBI to embark on a serious rate-cutting from the current rates beginning on December 6. This is intended to help revive the Indian economy, which has recently been projected to slow down. Aurodeep Nandi, Nomura’s India Economist, expects the repo rate to be cut by at least 25 basis points and a 50 basis points cut in the Cash Reserve Ratio measure to increase liquidity and spur economic growth.
This is expected to be a policy change due to the economic data predicting a GDP growth rate of 5.4 %, which is lower than the normal 6-7%. Such a step by the RBI is considered desirable because the effects of monetary policy are generally observed within six to nine months. This would assist in offsetting the demand slowdown and enhance liquidity, which aggressive forex interferences have strained.
Real Estate Sector’s
The real estate sector is especially sensitive to the next RBI Monetary Policy Committee (MPC) meeting as many expect rate cuts to ease the financial pressure on consumer homebuyers. Raheja and Signature Global explain that a rate cut could help revive buyers’ demand by easing the cost of loans and, therefore, bring stability to the market. The same sentiment has been echoed throughout the sector, posing that reduced interest rates will likely drive growth, specifically in affordable housing.
Real estate agents claim that the current interest rate, which has been constant for nearly two years, provides stability but inhibits expansion. The RBI’s approval holds the prospect of lowering home loan interest rates, which could help increase home sales in emerging markets and mitigate high monthly payments from raised property prices.
Economic Indicators and Future Projections
However, as pointed out by some sectors, the RBI is under a lot of pressure to control inflation, and the rate has slightly exceeded its 6% end-point. The decision before the MPC will be to simultaneously address the growth and stability objectives while prevailing global uncertainties and domestic factors such as low private capital expenditure and slower credit growth.
Furthermore, Nomura has recently changed its GDP growth estimates for India downwards, with FY25 estimates at 6% and FY26 – 5.9%. The firm also acknowledges a catalytic role of government spending in boosting the economy, recommending that capital spending is the key to realizing improved growth rates and avoiding fiscal deficits.
