GST Rate Cuts Curb Inflation: An Economic Recalibration

GST rate cuts have driven retail inflation down by 85 basis points, reaching a low of 0.25% in October. Experts suggest this downward trend may persist, posing a dilemma for the Reserve Bank of India regarding potential rate cuts in December amidst robust economic growth and inflation moderation.

The GST rate cuts have significantly reduced retail inflation, driving it down by 85 basis points to an unprecedented low of 0.25% in October, according to economists. This trend is expected to continue, potentially impacting monetary policy decisions in the coming months.

The Consumer Price Index (CPI), a primary measure for retail inflation, saw notable decreases, with exceptions in personal care where gold prices surged. The SBI's 'Ecowrap' report suggests that without the impact of gold, headline CPI might actually be negative.

This inflation data leaves the Reserve Bank of India in a complex position as it evaluates potential rate cuts. With higher economic growth rates and reduced inflationary pressure, the forthcoming decision in December's Monetary Policy Committee meeting could steer economic strategies significantly.

(With inputs from agencies.)