Chandigarh,dec 6
The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday kept the benchmark interest rate unchanged at 6.5 per cent for the 11th straight policy meeting. The MPC unanimously agreed to maintain neutral policy stance, signalling a cautious approach to current economic conditions.The RBI has been maintaining the repo rate at 6.5 per cent since February 2023. With the repo rate unchanged, all external benchmark lending rates (EBLR) that are linked to the repo rate will not increase, giving relief to borrowers as their equated monthly instalments (EMIs) will not increase.“The recent spike in inflation highlights the continuing risks of multiple and overlapping shocks to the inflation outlook and expectations. Heightened geo-political uncertainties and financial market volatility add further upside risks to inflation. High inflation reduces the purchasing power of both rural and urban consumers and may adversely impact private consumption. The MPC emphasises that strong foundations for high growth can be secured only with durable price stability. The MPC remains committed to restoring the balance between inflation and growth in the overall interest of the economy. Accordingly, the MPC decided to keep the policy repo rate unchanged at 6.50 per cent in this meeting,” said Reserve Bank of India (RBI) Governor Shaktikanta Das while announcing the outcome of the MPC meeting.Driven by a sharp increase in prices of food products, particularly the vegetables, India’s retail inflation touched a 14-month high in October. The inflation based on the consumer price index increased to 6.21 per cent in October, up from 5.49 per cent in September. He emphasised the central bank’s effort is to follow the flexible inflation target. He said high inflation would begin easing out in January-March with seasonal harvest.Also, India’s Gross Domestic Product (GDP) slowed to 5.4 per cent in the second quarter (July-September) of 2024-25, the third consecutive quarter of slower growth, reflecting weakened manufacturing, consumption, and private investments. As per government data, this is the lowest growth rate in seven quarters. The last time the economy fell below this was in the third quarter of fiscal 2023.
Inflation forecast
Governor Das said inflation for FY25 is projected at 4.8 per cent. For Q3, it is expected to rise to 5.7 per cent, but is anticipated to decline to 4.5 per cent in Q4. For Q1 FY26, inflation is projected at 4.6 per cent.
GDP growth projection
The RBI has cut the GDP growth projection to 6.6 per cent for the current financial year, from earlier forecast of 7.2 per cent. The real GDP growth for FY25 is now projected at 6.6 per cent. For Q3, the growth rate is expected to be 6.8 per cent, while for Q4, it is projected to rise to 7.2 per cent.
