(NDTV)
India’s Monetary Policy Committee, led by RBI Governor Shaktikanta Das, kept the benchmark repo rate unchanged for the eight straight meet. Following the review, the MPC decided the following on lending rates: To keep the repo rate unchanged at 6.5% with a 4:2 majority. The standing deposit facility rate, pegged 25 basis points below the repo rate, is at 6.25%. The marginal standing facility rate rate, which is 25 basis points above the repo rate, is at 6.75%. The committee had raised the benchmark repo rate by 250 basis points in the last cycle before opting for a pause in April last year.
Inflation Outlook
Headline inflation continues to moderate but remains above the target, driven by food price pressures, though easing core inflation remains a silver lining. The MPC has projected the FY25 CPI inflation at 4.5%. Food price uncertainties would continue to weigh on the inflation outlook. Rabi arrivals need to be carefully monitored. Industrial metals too have seen a rise in prices. However, the forecast of above normal monsoon bodes well for kharif season. Outlook on crude oil prices remains volatile.
Growth Outlook
Economic activity remains resilient with a positive momentum so far and growth continues to surpass estimates. Official estimates pegged GDP growth at 8.2% in FY24. The MPC has raised the real GDP growth projection for FY25 to 7.2% Above normal southwest monsoon should support agricultural activity and replenish reservoir levels. Private consumption is recovering and should gain steam with further pickup in rural activity and steady urban demand. A rise in discretionary spending expected by urban households, as per the RBI’s consumer survey, and improving income levels augur well for the strengthening of private consumption. The prospects of fixed investment remain bright with business optimism, healthy corporate and bank balance sheets, robust government capital expenditure and signs of upturn in the private capex cycle.
