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Shaktikanta Das, governor of the Reserve Bank of India (RBI), announced the monetary policy committee’s unanimous decision to continue with a rate hike pause on Thursday. This is the third time the RBI MPC has decided to press the pause button on the repo rate hikes.
Das also said that the rate hike pause has been done with “preparedness to act if situation so warrants”.
Das added that the MPC, with a majority of 5-1, has decided to continue with the withdrawal of accommodation.
After the announcement, the repo rate stands at 6.5 per cent. Since 2022, the repo rate has been hiked by 250 basis points.
Das added that the MPC would remain “watchful and evaluate the emerging situation”.
“India is uniquely placed to benefit from the ongoing transformational shift in the global economy,” he said.
However, Das added that the monetary policy transmission is still underway as headline inflation remains higher than the 4 per cent target.
On consumption, Das said that the upcoming festival season is expected to provide support to private consumption and investment activities.
He added that the FMCG sales pick-up in rural areas reflects an “incipient revival” of rural demand. It is expected to get a further boost with a good Kharif harvest.
However, the global economy continues to face daunting challenges of inflation, geopolitical uncertainty and extreme weather conditions.
CPI inflation projection revised upwards to 5.4%
Das also announced a revised retail inflation projection for FY24 at 5.4 per cent from 5.1 per cent earlier. In the second quarter, the consumer price inflation-based (CPI) inflation is expected to be 6.2 per cent, followed by 5.7 per cent in Q3 and 5.2 per cent in Q4.
He attributed higher inflation to a spike in tomato prices and a rise in cereal pulses.
“MPC will remain watchful of inflation and remains resolute to its commitment to align inflation to the targeted level of 4 per cent,” he said.
FY24 real GDP growth rate pegged at 6.5%
On India’s real gross domestic product (GDP) growth, Das said that the economy is expected to grow at 6.5 per cent in 2023-24 (FY24). In the first quarter, the rate will be 8 per cent, followed by 6.5 per cent in Q2, 6 per cent in Q3 and 5.7 per cent in Q4.
Moreover, in the first quarter of the next financial year (FY25), India will grow at a real GDP growth rate of 6.6 per cent.
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