The RBI’s monetary policy committee on Friday decided to keep the repo rate unchanged for the seventh time in a row, at 6.5 per cent. This is in line with the analysts’ expectations. The monetary policy stance continues to be ‘withdrawal of accommodation’. RBI has also kept the FY25 GDP projection at 7 per cent. It projects CPI inflation for 2024-25 at 4.5 per cent.
The RBI MPC also kept the SDF unchanged at 6.25 per cent, and MSF and Bank Rates maintained at 6.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
The repo rate unchange decision has been taken with 5 members in favour of the decision out of the total 6.
RBI Governor Shaktikanta Das on Friday presented the first bi-monthly monetary policy of FY25.
Das said the RBI remains vigilant towards upside risks to food inflation.
The rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022. The RBI last hiked the repo rate to 6.5 per cent in February 2023.
In February, the Consumer Price-based Inflation (CPI) stood at 5.1 per cent.
The government has mandated RBI to ensure CPI inflation at 4 per cent with a margin of 2 per cent on either side.
The RBI governor said, “Moderating inflationary pressure, sustained momentum in manufacturing, services sectors should boost private investment. Global growth remains resilient, recent uptick in crude oil prices needs to be closely monitored.”
Continuing geopolitical tensions pose upside risks to commodity prices. High, persisting food inflation could unhinge anchoring of inflationary expectations, he added.
“Elephant in the room (inflation) appears to have gone out for a walk, we want it to remain in forest,” he said.
On the rupee, the RBI governor said the Indian rupee has largely remained range-bound among emerging market peers, exhibited lowest volatility in 2023.
He said banks, NBFCs, other financial institutions must continue to give highest priority to governance.
Monetary policy transmission continues to be ‘work in progress’ in the credit market.
Financial stability is a joint responsibility of all stakeholders — banks, NBFCs, other financial institutions, said the RBI governor.
On remittances and forex reserves, he said India’s forex reserves reached all-time high of $645.6 billion as of March 29. He added that India continues to be largest recipient of remittances.
He said it is our prime focus to build up a strong buffer in form of forex reserves.
FY25 GDP Growth
The Reserve Bank on Friday retained GDP growth forecast of 7 per cent for 2024-25 financial year, lower than the 7.6 per cent expansion estimated for FY24. In its February monetary policy, the RBI had projected the GDP growth rate of 7 per cent for the financial year beginning April 1.
Announcing the current fiscal’s first bi-monthly monetary policy, RBI Governor Shaktikanta Das said the rural demand is gathering pace, and sustained growth in manufacturing sector should boost private investment. However, there are headwinds from geopolitical tensions and disruptions in the global trade route.
Das further said the country’s real GDP is expected to grow 7 per cent in 2024-25, with June quarter growth at 7 per cent, and September quarter at 6.9 per cent. In the third and fourth quarter the growth is expected to be 7 per cent each.
Earlier this week, Prime Minister Narendra Modi said the Reserve Bank has to accord “top-most priority” to growth and at the same time focus on trust and stability.
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