RBI MPC February 2025 Preview: Rupee, Growth and Rate-Cut Pressure
Why in the news
Before the February 2025 MPC meeting, calls for a rate cut grew even as the rupee weakened and inflation stayed sticky.
Key facts
- Rupee: ₹85 to ₹87 per dollar between December 2024 and February 2025, pushed by a rising US dollar tied to Donald Trump’s tariff hikes and exit from international tax accords.
- Growth: 2024-25 forecast cut to 6.4%.
- Inflation: over 5% for five months; possibly nearer the 4% target in January 2025.
- Finance Ministry blamed tight monetary policy for the urban demand slump; RBI argued the urban middle class needs higher disposable income.
Dilemmas for the MPC
| Issue | Detail |
|---|---|
| Rupee | A cut could weaken it and worsen imported inflation |
| Growth | Pressure to lower rates |
| Budget | Income tax cuts lift disposable income, matching RBI’s consumption focus |
Concerns
- The new Governor must lift growth without hurting the rupee or fuelling inflation.
- Shaktikanta Das had surprisingly cut rates in 2019, reversing his predecessor’s stance.
Exam angle
- Rupee near ₹87 per USD; 2024-25 growth forecast 6.4%; inflation target 4%.