The Reserve Bank of India (RBI) on Thursday released the minutes of the Monetary Policy Committee (MPC) meeting which was held from February 6 to 8.
In the minutes, the central bank highlighted that the policy must continue to be actively disinflationary to ensure anchoring of inflation expectations and fuller transmission.
“The MPC will carefully monitor any signs of generalisation of food price pressures to non-food prices which can fritter away the gains in the easing of core inflation. Geopolitical events and their impact on supply chains, and volatility in international financial markets and commodity prices are key sources of upside risks to inflation,” RBI said.
Why the policy rate remain unchanged?
The MPC minutes stated that during the meeting, RBI governor Shaktikanta Das explained why was the decision taken.
“These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.
Governor Das also mentioned that the current setting of monetary policy is moving in the right direction, with growth holding firm and inflation trending down to the target.
“At this juncture, monetary policy must remain vigilant and not assume that our job on the inflation front is over. We must remain committed to successfully navigating the ‘last mile’ of disinflation which can be sticky.”
“As markets are front-running central banks in anticipation of policy pivots, any premature move may undermine the success achieved so far. Price and financial stability are essential to sustain a long haul of high growth.”
“Policy imperative at the current juncture is to remain focused on achieving the 4% inflation target on a durable basis, keeping in mind the objective of growth,” he said.
RBI cautious on inflation prints
The members of the Reserve Bank of India’s (RBI) monetary policy committee (MPC) remained cautious on inflation prints due to uncertainty in food prices.
“Food price uncertainty remains a major source of volatility for headline inflation outlook. Growing geo-political tensions and supply chain disruptions due to new flash points also pose further risks to the inflation outlook,” Governor Shaktikanta Das said.
The deputy governor, Michael Debabrata Patra said, “Monetary policy must remain restrictive and maintain downward pressure on inflation while minimising the output costs of disinflation.”
India’s inflation trajectory would be shaped by the evolving food inflation outlook. “Effective supply side responses may keep food price pressures under check. The continuing pass through of monetary policy actions and stance is keeping core inflation muted,” RBI said.
India Ratings predicts GDP growth by 6.5% in 2024-25
India Ratings and Research predicted that the country is likely to see the GDP growth by 6.5% in 2024-25. Notably, this represents a decline from the statistics ministry’s first advance estimate of 7.3% for the current Financial Year.
As per the India Ratings report, Rs 3.53 lakh crore was raised in 2022-23 to finance a total of 982 large projects those of over Rs 1,000 crore. This is significantly higher than the Rs 1.98 lakh crore raised to finance 791 such projects in 2021-22.
It further expected the private final consumption expenditure to grow by 6.1% in 2024-25, up from 4.4% in 2023-24.
