The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) maintained the status quo on key policy rates in its first meeting of the financial year.
Committee Decision and Rationale:
Policy Stance Retained: The MPC decided to keep the repo rate unchanged at 6.5% and maintained its policy stance focused on the withdrawal of accommodation.
Inflation Concerns: Despite core inflation falling to 3.4% in February, elevated food prices contributed to the decision to remain watchful for upside risks to inflation.
Disinflationary Policy: RBI Governor Shaktikanta Das emphasized the need for policy to remain "actively disinflationary" to anchor inflation expectations and mitigate potential risks to disinflation.
Inflation and Growth Outlook:
Rising Food Inflation: Recent data showed an increase in consumer food price index to 8.66% in February, driven by higher prices in cereals, eggs, vegetables, pulses, and spices.
Monsoon Expectations: Anticipated improvements in rainfall, with La Niña conditions forecasted, may alleviate food inflation concerns, providing clarity in the coming months.
Growth Projections: RBI retained its GDP growth estimate at 7% for 2024-25, citing healthy momentum, particularly in private consumption and investment, despite lingering uncertainties.