RBI Monetary Policy: Has the Indian economy reached the Goldilocks moment?

Last Updated10/06/2023

In its latest policy review that was unveiled recently, the Monetary Policy Committee (MPC) of the RBI decided to maintain the status quo.

It refers to an ideal situation where there is steady growth.
The economic growth is neither too high to trigger inflation and nor too low for a slowdown.
In it, the economy is not expanding by a huge margin with inflation or shrinking into recession.
Features:
- The unemployment rate in the economy is really low.
- There is steady growth in the Gross Domestic Product (GDP) numbers and companies report better earnings.
- The retail inflation and the interest rates are relatively low.

Good for investors as companies perform well and stocks rally.
If the economy is steady and not in for sudden shocks, there will be profitable business growth.
With low inflation levels, the central bankers may not need to go for aggressive interest rate hikes.
A good chance of stable policymaking and achieving price stability.

The goldilocks phase is temporary in nature.
It sets in typically after an adverse shock to the economy, during the recovery and growth period.
Steady economic growth for any country cannot be on a sustainable long-term basis.
The pace of growth might quicken eventually or slow down based on the prevailing conditions.