Feb 8, 2024: On Thursday, the Reserve Bank of India (RBI) opted to keep interest rates unchanged, a decision widely anticipated, emphasizing its commitment to curbing inflation amidst robust economic growth in the nation.
The RBI maintained its policy repo rate at 6.5%, marking the fifth consecutive meeting without a change, following indications of concluding its tightening cycle in mid-2023.
Governor Shaktikanta Das, speaking in a livestream, reiterated the bank’s dedication to maintaining tight policy measures to align inflation closer to its 4% target. He highlighted the rapid expansion of the Indian economy, anticipating it to continue outperforming global counterparts in the foreseeable future.
Das projected real gross domestic product (GDP) for the ongoing fiscal year, ending March 31, 2024, at 7.3%. Further, he forecasted a real GDP growth of 7% for fiscal year 2025, emphasizing India’s significant lead over other global economies.
India’s economy has been the swiftest-growing among major economies in recent years, bolstered by heightened government expenditures and foreign investments. Notably, consumer spending, particularly in urban areas, has served as a pivotal growth driver.
However, Das underscored persistent inflation risks, underscoring the importance of maintaining balanced and controlled inflation to sustain continuous economic expansion.
The RBI’s decision coincides with the imminent release of Indian consumer price index inflation data, expected to reveal enduring inflationary pressures, surpassing the RBI’s 4% annual target in January.
Food price inflation, especially in vegetables and grains, has remained contentious, with sporadic monsoons in 2023 leading to shortages in some regions of the country.
“The future trajectory of inflation will hinge on food inflation, which presents significant uncertainty,” noted Das.
He also outlined CPI inflation projections at 5.4% for the current fiscal year, with a forecast of 4.5% for fiscal 2025, contingent on a stable monsoon.
Following the RBI’s announcement, the Indian rupee experienced a marginal 0.1% uptick, while the Nifty 50 stock index remained relatively unchanged.\
