RBI Monetary Policy 202: Shaktikanta Das, governor of the Reserve Bank of India (RBI), declared that the policy repo rate of 6.5% will remain constant, as per the decision of the Monetary Policy Committee (MPC). This decision is made in the face of both internal and international economic uncertainty, as retail inflation keeps rising beyond the 4% objective. This decision was made by the MPC by a majority vote.
Growth Projections and Inflation
Governor Das emphasised that the fiscal year 2024–2025 will see growth at or above 7% for the fourth year in a row if the estimated GDP growth of 7.2% is achieved. He pointed out that the headline Consumer Price Index (CPI) is trending towards deflation, and that monetary policy is a key factor in this development. Thanks to supply-side improvements and government initiatives, headline inflation fell by 2.3 percentage points between the first quarter of 2022–2023 and the fourth quarter of 2023–2024. The general disinflation process has, however, slowed down as a result of frequent shocks to food prices.
Other Key Rates Remain Unchanged
The bank rate and the marginal standing facility (MSF) rates are both maintained at 6.75% and the standing deposit facility (SDF) rate also continues to remain at 6.25% in parallel with the repo rate. The goal of these choices is to balance monetary policy within the context of the current economy.
Commitment to Gradual Withdrawal of Accommodation
Governor Das stressed the significance of a monetary policy that is well-balanced. He restated the MPC’s pledge to progressively withdrawing accommodation in order to guarantee that inflation aligns with the target range. He emphasised the need for long-term price stability, saying that “monetary policy must continue to remain disinflationary and be resolute in its commitment to aligning inflation to the target of 4% on a durable basis.”
Revised Growth Projections
The Reserve Bank of India has updated its growth forecasts for the fiscal year 2024–2025, predicting 7.2% GDP growth. This follows the fiscal year 2023–24 (FY24), when GDP growth surpassed experts’ projections and increased to 8.2 percent. The following are the estimated quarterly growth rates:
- Q1: 7.3%
- Q2: 7.2%
- Q3: 7.3%
- Q4: 7.2%
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