The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday decided to keep policy rate unchanged for the eighth time in a row by 4:2 majority.
While announcing the decision, the governor said that the MPC decided by a majority of 4 out of 6 members to remain focussed on “withdrawal of accomodation” to ensure inflation progressively aligns to the target while supporting growth.
Consequently, the standing deposit facility (SDF) rate remains at 6.25%, and the marginal standing facility (MSF) rate and the bank rate at 6.75%, he said.
It is to be noted that the rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022.
In April, announcing the first bi-monthly monetary policy for FY25, RBI Governor Shaktikanta Das had said the MPC has decided to keep the repo rate unchanged at 6.5% by a majority vote of 5:1.
Also Read:RBI MPC meet: Experts bet on status quo, SBI Research predict rate cut in Q3FY25
GDP growth projection:
Governor Das said the real GDP growth has been projected at 7.2% for FY24-25. Notably, this has increased from last MPC’s projection which was at 7%.
For FY24-25, real GDP growth for Q1 is projected at 7.3%, Q2 at 7.2%, Q3 at 7.3% and Q4 at 7.2%, he said.
Inflation projection:
CPI Inflation for 2024-25 is projected at 4.5%. Giving the breakage, he said the CPI Inflation for Q1 is projected at 4.9%, Q2 at 3.8%, Q3 at 4.6% and Q4 at 4.5%.
“CPI headline inflation softened further during March and April, though persisting food inflation pressures offset the gains of disinflation in core and deflation in fuel groups. Despite some moderation, pulses and vegetables inflation remained firmly in double digits. Vegetable prices are experiencing a summer uptick following a shallow winter season correction,” he said.
The deflationary trend in fuel was driven primarily by the LPG price cuts in early March. Coal inflation softened for the 11th consecutive month since June 2023. Services inflation moderated to a historic low and goods inflation remained contained, he added.
As per the data released by the National Statistical Office (NSO) of Ministry of Statistics and Programme Implementation (MoSPI) last week, India’s Gross Domestic Product (GDP) growth rate in the quarter ending March 31, 2024 grew by 7.8%.
The GDP growth provisionally stands at 8.2% for the Financial Year 2023-24 (FY24), as compared to the growth rate of 7% in FY23.
In its Annual Report, the RBI said India’s GDP growth is robust on the back of solid investment demand which is supported by healthy balance sheets of banks and corporates, the government’s focus on capital expenditure and prudent monetary, regulatory and fiscal policies.
The central bank had said that the Indian economy is navigating the drag from an adverse global macroeconomic and financial environment.
Governor Das said that the central bank transferred Rs 2.11 lakh crore to the union government as dividend. He added that the central board decided to increase the risk provisioning to 6.5% of the RBI balance sheet.
“India’s banking system remains resilient backed by asset quality, rise in profitability. The NBFCs have displayed strong financials in FY24. The banking sector, NBFCs and overall financial sector remains robust,” he highlighted.
(This is a developing story)
