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New Delhi: The Reserve Bank of India’s Monetary Policy Committee (RBI MPC) has opted to maintain the repo rate at 6.5 per cent for the eleventh consecutive time, as announced by Governor Shaktikanta Das on Friday. During the meeting from December 4 to 6, the MPC members cast a 4:2 vote in favour of preserving the current rate.
Since February 2023, the RBI has kept the repo rate steady at 6.5 per cent. Despite suggestions for a reduction, the central bank remains committed to managing inflation while fostering economic growth.
“MPC is of the view that enduring price stability is the key to a sustainable high growth trajectory. The committee is dedicated to re-establishing the balance between inflation and growth for the economy’s benefit,” stated Das.
The standing deposit facility (SDF) rate is held at 6.25 per cent, and both the marginal standing facility (MSF) rate and the bank rate are kept at 6.75 per cent, according to the governor.
Furthermore, the RBI MPC has resolved to continue with its ‘neutral’ policy stance, with four out of six members voting in favour of this approach. Governor Das explained that this decision aims to align inflation with the target of 4 percent while also promoting economic growth.
RBI’s real GDP projection
For the financial year 2024-25 (FY25), RBI lowered its real gross domestic product (GDP) growth forecast to 6.6 per cent, down significantly from earlier projections of 7.2 per cent:
Q3 FY25: Revised to 6.8 per cent, down from 7.4 per cent
Q4 FY25: Revised 7.2 per cent, earlier 7.4 per cent
Q1 FY26: Revised to 6.9 per cent, down from 7.3 per cent
Q2 FY26: 7.3 per cent
In October, inflation soared to a 14-month peak of 6.21 per cent, propelled by soaring food prices and geopolitical upheavals that have drastically disrupted global supply chains. “Inflation surged in September and October 2024, driven by an unexpected rise in food prices. Although core inflation remained at lower levels, it too saw an increase in October,” stated Das. He noted, however, that fuel growth continued its deflationary trend for the 14th straight month in October.
The RBI’s Monetary Policy Committee anticipates that food prices will sustain elevated levels of headline inflation in the October-December quarter. “A successful rabi season is essential for mitigating food inflation pressures… Projected record Kharif harvests are expected to alleviate the heightened prices of rice and tur dal specifically,” Das mentioned.
RBI CPI-based inflation projection
For the financial year 2024-25 (FY25), RBI revised its projections for consumer price index (CPI)-based inflation to 4.8 per cent from 4.5 per cent:
Q3 FY25: Revised to 5.7 per cent, from 4.8 per cent
Q4 FY25: Revised to 4.5 per cent, from 4.2 per cent
Q1 FY26: Revised 4.6 per cent, from 4.3 per cent
Q2 FY26: 4 per cent
“Manufacturing and service firms surveyed by the Reserve Bank indicate an increase in input costs and selling prices in the January-March quarter,” Das stated. India’s GDP growth for Q2 FY25 decelerated to 5.4 per cent, marking a two-year low, a decrease from 8.1 per cent in the corresponding period last year. This was also notably below the RBI’s projection of 7 per cent for the quarter. The downturn is ascribed to the underperformance in the manufacturing and mining sectors.
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