The Reserve Bank of India (RBI) has kept the repo rate unchanged at 6.50% following the latest meeting of the Monetary Policy Committee (MPC), marking its commitment to tackling inflation while supporting economic growth. In its policy statement, RBI Governor Shaktikanta Das reiterated the central bank's focus on controlling inflation, which remains above the target range, but also acknowledged the need to foster economic recovery.
In a key update, the RBI revised its GDP growth forecast for the fiscal year 2024 to 6.5%, up from the earlier estimate of 6.3%. The positive revision is driven by strong domestic demand and a recovery in key sectors, such as manufacturing and services. However, the central bank has also raised concerns about global economic uncertainty, particularly the impact of ongoing geopolitical tensions and the possibility of slower global growth.
On inflation, the RBI increased its inflation forecast for FY24 to 5.4%, up from the previous estimate of 5.2%. The rise in inflation expectations is attributed to higher food prices and supply-side constraints, though the central bank remains confident that inflation will gradually ease over the coming months. The RBI's inflation target remains within the 4% range, and it emphasized that it will continue to take necessary steps to bring inflation down to acceptable levels.
Other key announcements included the continuation of the central bank’s stance on liquidity management, as well as the decision to keep the accommodative policy stance under review. The RBI also noted that it would monitor the evolving global economic conditions and adjust its policy as needed to support sustainable growth and price stability.
Market participants and analysts have expressed a mixed reaction to the RBI's policy stance, with some welcoming the revised growth forecast while others remain concerned about the central bank’s inflation outlook. The decision to keep interest rates unchanged indicates that the RBI is prioritizing inflation control over aggressive rate cuts to stimulate growth.
As the festive season approaches, the RBI's policy decisions will continue to influence investor sentiment and economic activity. Consumers and businesses are likely to keep a close watch on any future policy changes, especially regarding borrowing costs and inflation management.
