RBI governor Shaktikanta Das, while announcing the decisions of the bi-monthly meet, said that the decision was taken with a majority of 4:2 by the MPC. It also decided to retain the withdrawal of accommodation stance.
“We are seeing good amount of convergence between market expectations and RBI policies, they are well aligned,” said Das.
An ET poll consisting of 12 respondents had unanimously predicted the MPC would keep the repo rate unchanged at the end of its three-day meeting, which commenced on August 6, 2024.
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Inflation Forecast
The MPC left its inflation forecast for this fiscal year (FY25) unchanged at 4.5 per cent, even amid caution on food price trajectory that may hurt core inflation and intensifying geopolitical tensions which poses threat to any comfort on crude prices easing to multi-month lows.
The central bank now sees inflation for Q2, Q3 and Q4 of this fiscal year at 4.4 per cent, 4.7 per cent and 4.3 per cent, respectively. In the June policy, the monetary authority had pegged the inflation readings at 3.8 per cent, 4.6 per cent and 4.5 per cent respectively.
RBI Governor Shaktikanta Das has consistently emphasized the need to maintain focus on reducing inflation towards the 4 per cent target sustainably before considering a policy shift.
The RBI has been grappling with the persistent issue of food inflation, symbolized by the “thali” or food platter. This has become a key indicator for analysts tracking inflation trends. The RBI’s Monetary Policy Committee (MPC) is expected to keep the key interest rate steady at 6.5 per cent due to ongoing food inflation concerns.
GDP growth Forecast
The MPC continues to expect Indian economy to grow at 7.2 per cent in FY25, even as it moderated outlook for the first quarter, Governor Das announced.
While forecast for FY25, Q2FY25, Q3FY25 and Q4FY25 was left unchanged, Das said forecast for Q1FY25 has been reduced to 7.1 per cent.
The MPC during its June 2024 meeting had forecast India’s GDP to grow at 7.2 per cent in FY25. Further, the economy’s growth rate was pegged at 7.3 per cent, 7.2 per cent, 7.3 per cent and 7.2 per cent in each of the four quarters of the entire financial year.
The Indian economy grew at 8.2 per cent in FY24.
What happened in June meet
- Standing deposit facility (SDF) rate was also unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
- Moreover, there was once again emphasis laid on keeping inflation target at 4 per cent.
- Real GDP growth forecast for FY25 was hiked to 7.2 per cent with Q1 at 7.3 per cent; Q2 at 7.2 per cent; Q3 at 7.3 per cent; and Q4 at 7.2 per cent
- CPI inflation for FY25 was projected at 4.5 per cent with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent
- In its June meeting, Das & Co proposed various reforms including revision of definition of bulk deposits as ‘Single Rupee term deposits of Rs 3 crore and above’ for SCBs (excluding RRBs) and SFBs
- RBI also announced its plans to rationalise guidelines on export and import of goods and services in line with the changing dynamics of cross-border trade transactions globally.
- The central bank also announced plans to set up a Digital Payments Intelligence Platform to mitigate payment fraud risks.
- RBI, in June, proposed to bring UPI Lite within ambit of e-mandate framework to introduce auto-replenishment facility if balance goes below a threshold limit set by user.