RBI Governor Shaktikanta Das announced the third consecutive pause on rate hikes by the monetary policy committee, signaling readiness to act if needed. Despite global challenges, Das highlighted India’s economic resilience, acknowledging inflation concerns and rural demand revival. The revised CPI projection stands at 5.4%, while FY24 GDP growth is pegged at 6.5%, reflecting cautious optimism.
Shaktikanta Das, the governor of the Reserve Bank of India (RBI), disclosed the unanimous decision of the monetary policy committee to maintain the current rate hike pause on Thursday. This marks the third instance in which the RBI MPC has opted to halt repo rate increases.
Das further emphasized that this decision to pause rate hikes has been made with a proactive stance, ready to take action if circumstances demand. He added that the MPC, with a majority of 5-1, has chosen to persist with the reduction of accommodation. As of the announcement, the repo rate now stands at 6.5 percent, reflecting a cumulative increase of 250 basis points since 2022.
Additionally, Das highlighted the MPC’s commitment to vigilance and its commitment to assess the evolving scenario. Presenting the MPC’s verdict, Das underscored the heightened robustness and stability of the Indian economy, noting substantial advancements in reining in inflation. He also noted that India is uniquely positioned to capitalize on the transformative shifts occurring in the global economy.
Nevertheless, Das acknowledged the ongoing process of monetary policy transmission, as headline inflation continues to surpass the 4 percent target. Regarding consumption, Das projected that the upcoming festival season would provide a boost to private consumption and investment undertakings. He pointed out that the resurgence of Fast-Moving Consumer Goods (FMCG) sales in rural areas indicates the incipient revival of rural demand, set to gain further momentum with a favorable Kharif harvest.
However, the global economy remains confronted by formidable challenges spanning inflation, geopolitical uncertainty, and adverse weather conditions.
The Consumer Price Inflation (CPI) projection has been adjusted upwards to 5.4 percent. Das also unveiled a revised estimate for retail inflation in FY24, elevating it from 5.1 percent to 5.4 percent. Anticipated figures for the second quarter indicate a CPI inflation of 6.2 percent, followed by 5.7 percent and 5.2 percent in the third and fourth quarters, respectively. He attributed the higher inflation to spikes in tomato prices and the escalation of cereal and pulse costs.
“MPC will remain vigilant regarding inflation and remains steadfast in its commitment to align inflation with the targeted 4 percent level,” he affirmed.
As for India’s real gross domestic product (GDP) growth, Das projected a rate of 6.5 percent for the fiscal year 2023-24 (FY24). The initial quarter is expected to witness an 8 percent growth, trailed by 6.5 percent, 6 percent, and 5.7 percent growth rates in the second, third, and fourth quarters, respectively. Furthermore, in the first quarter of the subsequent fiscal year (FY25), India’s real GDP is anticipated to grow by 6.6 percent.
