On Thursday, Economic Affairs Secretary Ajay Seth stated that the recent 0.50% interest rate cut by the US Federal Reserve is unlikely to have any significant effect on foreign investments in India. He explained that while the Fed’s move benefits the US economy, India will make decisions based on its own economic needs. The Reserve Bank of India (RBI) will focus on what is best for the Indian economy, Seth added.
No Major Impact on Indian Investments Expected, Says Economic Affairs Secretary
The US Federal Reserve’s rate cut of 50 basis points comes after keeping rates at a more than two-decade high for 14 months. However, Seth believes that this rate cut will not cause a big change in foreign investments in India. “We need to observe the situation of other global markets,” he emphasized. Despite the changes in the US, he indicated that India’s economy operates in its own space and will not be easily influenced by external factors.
The possibility of another rate cut by the Fed in 2024, with expectations of an additional 50 basis points, remains, but it will likely have limited influence on Indian markets, Seth hinted.
RBI to Make Independent Decision During October 2024 Monetary Policy Meeting
Ajay Seth highlighted that the Reserve Bank of India (RBI) will make its own decisions regarding interest rates at the upcoming Monetary Policy Committee (MPC) meeting scheduled for October 7-9, 2024. While there is speculation surrounding the Fed’s recent moves, Seth clarified that India’s central bank will prioritize what is beneficial for the domestic economy. The Indian economy has its own concerns, and decisions will be made accordingly.
No Immediate Rate Cut in India, Says Experts
Vishal Goenka, co-founder of Indiabonds.com, echoed similar sentiments, stating that India remains insulated from global rate changes. He highlighted that with strong economic growth and steady inflation rates, India does not require an immediate rate cut. Goenka said, “There is no need for a rate cut in India right now.”
Since February 2023, the RBI has kept its repo rate unchanged at 6.50% in an effort to control inflation. Recent data shows that India’s headline retail inflation remained at 3.65% in August 2024, falling below the RBI’s target of 4% for the second month in a row. The economic outlook remains stable, supporting the belief that no immediate rate cuts are necessary.
