In a decisive move, the Reserve Bank of India (RBI) announced its decision to maintain the status quo on policy rates, keeping the repo rate unchanged at 6.5 per cent. The Monetary Policy Committee (MPC) convened from April 3 to 5, with a majority 5:1 voting in favour of retaining the key policy rate. This move was accompanied by a continuation of the ‘withdrawal of accommodation’ stance in the monetary policy.
Governor Shaktikanta Das, leading the six-member MPC, emphasised the central bank’s commitment to economic stability amidst prevailing uncertainties. Despite robust growth projections, the RBI opted for a cautious approach, citing persisting challenges, particularly in managing inflationary pressures.
Addressing concerns, Governor Das highlighted the nuanced nature of inflationary trends, acknowledging the moderation in headline inflation while underlining persistent food inflation. The RBI aims for sustainable disinflation, with a focus on aligning Consumer Price Index (CPI) inflation with the targeted threshold.
Looking ahead, the RBI foresees a moderation in headline inflation, propelled by favourable factors such as the upcoming rabi harvests and expectations of a normal monsoon. However, uncertainties loom, especially concerning global commodity prices and adverse climate events, posing risks to the inflation outlook.
The central bank’s projections for GDP growth remained steady at 7 per cent for fiscal year 2024-25, with anticipated quarterly growth rates. Despite geopolitical tensions and global economic fragility, the Indian economy has exhibited resilience, with a robust manufacturing sector and sustained investment momentum.
While the RBI’s inflation forecast stands at 4.5 per cent for fiscal 2024-25, challenges persist, particularly in managing inflationary pressures in non-perishable food categories. Supply-side interventions have played a crucial role in tempering prices, with notable declines in cereal inflation.
Amidst these developments, interest rates on loans and deposits are expected to remain largely unchanged. Borrowers can find relief as external benchmark lending rates remain steady, thus averting potential increases in equated monthly instalments (EMIs). However, banks may face pressure on deposit growth, potentially leading to upward revisions in deposit rates in certain segments.
In summary, the RBI’s decision reflects a balanced approach aimed at sustaining economic momentum while navigating inflationary challenges. As uncertainties persist, the central bank remains vigilant, underscoring its commitment to ensuring stable economic conditions in the foreseeable future.
