The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting to determine the policy rate in the country commenced today in Mumbai.
Chaired by RBI Governor Shaktikanta Das, the three-day meeting will run from December 4 to December 6, with the Governor announcing the policy decisions on Friday, December 6.
This meeting takes place amid significant economic challenges, including lower-than-expected GDP growth, high inflation, and declining production levels, all of which have raised public concerns.
Ashok Gulati, Indian agricultural economist and Professor at the Indian Council for Research on International Economic Relations (ICRIER) stated that the vegetable inflation is beyond the central bank’s control. He also noted that the GDP growth figures for the second quarter indicate that the RBI may be slow to adjust its policies, such as reducing the repo rate.
However, the economist emphasized that it’s not too late for the RBI to take corrective action and make necessary adjustments now.
He told “Tomato price inflation has humbled RBI. Veggies inflation cannot be tamed by RBI. On reducing repo rate, GDP numbers of Q2 suggest that RBI is behind the curve. But it is never too late…they should act now”.
In the last MPC meeting held in October, the central bank maintained the policy repo rate at 6.5 per cent for the 10th consecutive time. The decision was taken with a majority vote of 5 out of 6 members.
The standing deposit facility (SDF) rate was left unchanged at 6.25 per cent, while the marginal standing facility (MSF) rate and the bank rate remained steady at 6.75 per cent.
As per official data, retail inflation surged to 6.21 per cent in October, breaching the RBI’s upper tolerance limit of 6 per cent.
Data from the Ministry of Statistics and Programme Implementation revealed food inflation at a concerning 10.87 per cent, with vegetable inflation soaring to 42.18 per cent. Rural inflation stood at 6.68 per cent, while urban inflation was comparatively lower at 5.62 per cent.
Additionally, the economy grew by 5.4 per cent in real terms during the July-September quarter of the 2024-25 financial year. This growth was significantly lower than the RBI’s forecast of 7 per cent.
These figures highlight the need for the MPC to carefully evaluate policy measures to address inflationary pressures and revive economic growth in the coming months.
