Navigating 2024: RBI Striking the balance between growth and inflation in India

Inflation Trends: A Closer Examination 

In 2023, India demonstrated economic resilience with a robust GDP growth and strong GST collections. However, a persistent challenge remains—the inflation rate exceeding the Reserve Bank of India's (RBI) 4 percent target. The Consumer Price Index (CPI)-based inflation was 4.87 percent in October, dipping to 5.5 percent in November.

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RBI Projections: Charting the Course for Inflation

In its recent policy meeting, the RBI projected CPI-based inflation at 5.4 percent for FY24, with a slight dip to 5.2 percent in Q4. These projections serve as a guide for understanding the anticipated inflation trajectory in 2024.

Insights from Experts:

1- Manoranjan Sharma, Chief Economist, Infomerics Ratings

Sharma attributes the inflationary trend to a five-year low monsoon in 2023, impacting agricultural production. He underscores the Monetary Policy Committee's (MPC) vigilance due to volatile and uncertain food prices. Despite these challenges, Sharma expresses optimism, citing transformative drivers like the consumer boom, an ascendant middle class, and a green transition.

2- VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services

Vijayakumar predicts inflation in the range of 4.6 to 4.8 percent for 2024, with an anticipated dip to around 4 percent by mid-2024. He further expects a robust GDP growth of 6.6 to 6.8 percent, driven by substantial government capital expenditure. These predictions align with his analysis of the economic landscape.

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3- Deepak Jasani, Head of Retail Research, HDFC Securities

Jasani projects India's growth at 6.8-7 percent in FY24, with growth rates in Q1 to Q3FY25 potentially at 5.9-6.5 percent. He notes the impact of a high base effect on growth rates, presenting a factual analysis based on economic indicators.

4- Rahul Singh, CIO-Equities, Tata Mutual Fund

Singh anticipates the RBI's continuation of a stealth-tightening mode, projecting the ten-year G-sec to trade in the range of 7.15 to 7.30. He highlights the positive impact of global bond index weight increase on rates, grounded in market dynamics.

5- Deepak Agrawal, CIO-Debt, Kotak Mahindra AMC

Agrawal notes the RBI's unchanged CPI inflation forecast at 5.4 percent for FY24. He observes a trend of slowing core inflation, presenting downside risks to growth from a potential slowdown in investment and consumption based on economic data.

Conclusion: A Strategic Outlook

In the intricate interplay between inflation and growth, expert analyses converge on the potential for a dip in inflation below 4 percent while maintaining robust economic growth. The RBI's projections serve as a factual foundation, offering a cautiously optimistic outlook for India's economic trajectory in 2024.

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