Reserve Bank of India’s Monetary Policy Announcement for FY 2024-25

RBI Mumbai

New Delhi: Today marks the first announcement by the RBI’s Monetary Policy Committee (MPC) for the Financial Year 2024-25 (FY25).
As per the RBI, the repo rate remains unchanged at 6.5%, consistent with the previous six MPC meetings.

MPC Meeting Overview:

  • Duration: The MPC’s rate-setting panel convened for a two-day review meeting starting on April 3 and concluding today.
  • Policy Stance: RBI Governor Shaktikanta Das emphasized the need for the monetary policy to stay actively disinflationary. The ‘withdrawal of accommodation’ stance is maintained, with five out of six members supporting the decision.

Economic Growth and Projections:

  • GDP Growth: The Indian economy exhibited robust growth, recording an 8.4% increase in the fourth quarter of 2023, leading major economies globally.
  • Inflation Rates: Retail inflation in February accelerated to 5.09%, primarily driven by high food prices, surpassing the RBI’s target of 4%.
  • Forecast for FY25: The RBI projects the economy to expand by 7% in FY25, aligning with previous estimates.

Factors Influencing Consumer Demand:

  • Rural Demand: A strengthening in rural demand is anticipated.
  • Employment: Improvements in employment conditions are expected to contribute positively.
  • Manufacturing Sector: A continued uptick in manufacturing is projected to bolster consumer demand.

Inflation and Interest Rate Dynamics:

  • Committee’s Vote: In the latest meeting, one member advocated for a rate cut, citing that real interest rates are relatively high, with inflation projected to average 4.5% in 2024-25.
  • Inflation Trends: While headline inflation has consistently exceeded the RBI’s benchmark, core inflation has dipped below 4%.

Monetary Policy Outlook:

  • The MPC’s current stance indicates a likelihood of maintaining a tight monetary policy shortly.