Monetary Policy 2024: RBI Retains Rate at 6.5%, Ups FY25 GDP Forecast to 7.2%

Monetary Policy 2024: RBI Retains Rate at 6.5%, Ups FY25 GDP Forecast to 7.2%

Keywords: Monetary Policy, Inflation, Reserve Bank of India (RBI), Gross Domestic Product (GDP)

In its latest monetary policy announcement, the Reserve Bank of India (RBI) has decided to maintain its benchmark interest rate, the repo rate, at 6.5%. The decision aims to address persistent high food inflation while supporting economic growth.

Inflation:

The RBI acknowledged that inflation, particularly in food items, remains elevated. Despite some moderation in recent months, headline inflation is expected to stay above the target of 4% in the near term. The elevated food inflation is attributed to supply chain disruptions, international price pressures, and adverse weather conditions.

Interest Rates:

Despite the inflation concerns, the RBI has opted to retain the repo rate at 6.5%. The central bank believes that this stance is appropriate to balance growth and inflation objectives. It expects inflation to gradually moderate in the coming months as supply-side constraints ease.

GDP Forecast:

For the financial year 2024-25 (FY25), the RBI has revised its GDP growth forecast to 7.2%. This is higher than the previous estimate of 6.4%. The upward revision reflects improved global growth prospects, strong domestic consumption demand, and government initiatives to boost infrastructure spending.

Policy Outlook:

The RBI has indicated that it will continue to monitor inflation closely and adjust its policy stance as necessary. It remains committed to bringing inflation within the target range while supporting economic growth.

Other Measures:

In addition to the rate decision, the RBI also announced measures to enhance liquidity and support the financial system. These include:

Expanding the scope of the liquidity adjustment facility to include state development loans
Enhancing the rediscounting facility for banks

Conclusion:

The RBI’s monetary policy decision reflects a cautious approach to balancing growth and inflation. While inflation remains a concern, the central bank believes that maintaining the current interest rate stance is appropriate. The revised GDP forecast of 7.2% for FY25 provides cautious optimism for the Indian economy.