In its 50th meeting held from 6th-8th August 2024, the Monetary Policy Committee (MPC) has decided to keep the policy repo rate unchanged at 6.50 per cent, Reserve Bank of India Governor Shaktikanta Das has said on Thursday. He stated that the decision was made after “a detailed assessment of the evolving macroeconomic and financial conditions and the outlook” by a 4 to 2 majority.
Dr. Shashanka Bhide, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra and Shaktikanta Das voted to keep the policy repo rate unchanged at 6.50 per cent, while Dr. Ashima Goyal and Prof. Jayanth R. Varma had voted to reduce the policy repo rate by 25 basis points.
The Chairman stated: “improved agricultural activity brightens the prospects of rural consumption, while sustained buoyancy in services activity would support urban consumption. The healthy balance sheets of banks and corporates; thrust on capex by the government; and visible signs of pick up in private investment would drive fixed investment activity. Improving prospects of global trade are expected to aid external demand.” He, however, also added that the spillovers from protracted geopolitical tensions, volatility in international financial markets and geoeconomic fragmentation, however, pose risks on the downside.
Taking all these factors into consideration, the MPC has projected the real GDP growth for 2024-25 at 7.2 per cent with Q1 at 7.1 per cent; Q2 at 7.2 per cent; Q3 at 7.3 per cent; and Q4 at 7.2 per cent. Real GDP growth for Q1:2025-26 is projected at 7.2 per cent (Chart 1). The risks are evenly balanced, Das added.
On inflation, the RBI Chairman stated that in the month of June 2024, headline inflation increased to 5.1 per cent after remaining steady at 4.8 per cent during April and May 2024. He said that food inflation, with a weight of around 46 per cent in the consumer price index (CPI) basket, contributed to more than 75 per cent of headline inflation in May and June. “Vegetable prices increased sharply and contributed about 35 per cent to inflation in June. High inflation pressures persisted across other major food items also. On the other hand, the softening in core inflation continues to be broad-based, with core services inflation touching a new low in the current CPI series during May-June 2024”, he added.
Assuming a normal monsoon, and taking into account the 4.9 per cent inflation print in Q1, the Monetary Policy Committee predicted CPI inflation for 2024-25 at 4.5 per cent, with Q2 at 4.4 per cent; Q3 at 4.7 per cent; and Q4 at 4.3 per cent. Further, CPI inflation for Q1:2025-26 is projected at 4.4 per cent. The risks are evenly balanced, the RBI Chairman said.
