TMS Ep406: RBI rate pause, food labelling, markets, Finance Commission

While most central banks -- including the US Fed -- are still increasing interest rates to control inflation, the Reserve Bank of India has lifted its foot off the pedal. Its Monetary Policy Committee has kept the policy rate unchanged at 6.5 per cent after six consecutive hikes. The panel also lowered the projection for inflation in FY24 and moderately raised the growth outlook. So, did the pause come too soon? And, how will the economy fare in the coming six months? 

During the MPC meeting, the RBI governor also cautioned that the prices of milk are likely to remain high during the coming summer. Milk prices have risen by 12-15% in the last 15 months. Meanwhile, a dairy product was in the news recently for a very different reason. The country’s food safety regulator had to withdraw a directive to use the Hindi word ‘dahi’ on curd packets, after protests in the south. And it comes amid the ongoing discussions on the front-of-the-pack labelling (FOPL) norms. The government wants to regulate processed food products to prevent them from unbalancing diets. 

Meanwhile, market analysts are not impressed with the Reserve Bank of India’s surprise rate hike pause. They believe that it maybe a temporary pause rather than an end to the tightening cycle. In our next report, Nikita Vashisht and Puneet Wadhwa explore what the RBI’s move means for the markets, and what should be investors’ strategy?

The Centre recently told Lok Sabha that it will constitute the 16th Finance Commission this year. It will give its recommendations for five years starting April 1, 2026. But what is a Finance Commission? Listen to this episode of the podcast for answers.