Reserve Bank of India (RBI) Governor Shaktikanta Das delivers the Monetary Policy statement, Friday, Dec. 6, 2024.
| Photo Credit: PTI

The Reserve Bank of India raised India’s Consumer Price Inflation outlook for 2024-25 to 4.8% from 4.5%, with Q3 at 5.7% and Q4 at 4.5%. Going into FY 2025-26, the RBI projected Q1 inflation at 4.6% and Q2 at 4%.

Inflation increased sharply in September and October, led by an unanticipated increase in food prices. Core inflation, though at subdued levels, also registered a pick-up in October, the Reserve Bank of India Governor Shaktikanta Das said on Friday (December 6, 2024).

In the near term, despite some softening, lingering food price pressures are likely to keep headline inflation elevated in the third quarter — October to December, Mr. Das said. The near term inflation and growth outcomes in India have turned somewhat adverse since the last Monetary Policy Review, Mr. Das noted.

Manufacturing and services firms surveyed by the Reserve Bank point to hardening input costs and hikes in selling prices in Q4 of 2024-25 — January to March.

The RBI’s Monetary Policy Committee (MPC) on Friday (December 6, 2024) decided to keep the policy repo rate unchanged at 6.50% for the 11th consecutive time.

Reserve Bank of India (RBI) Governor Shaktikanta Das delivers the Monetary Policy statement, Friday, December 6, 2024.
| Photo Credit: PTI

The Reserve Bank of India (RBI) on Friday (December 6, 2024_) has projected India’s real GDP growth for FY25  at 6.6%, with Q3 at 6.8% and Q4 at 7.2%..

The real GDP growth in the first quarter of 2025-26 is projected at 6.9% and the Q2 at 7.3%.

According to RBI Governor Shaktikanta Das, “the risks are evenly balanced”.

“On the domestic growth situation, growth in real GDP in the second quarter at 5.4% turned out to be much lower than anticipated. This decline in growth was driven mainly by a substantial deceleration in industrial growth from 7.4% in Q1 to 2.1% in Q2 due to subdued performance of manufacturing companies, contraction in mining activity and lower electricity demand,” the RBI Governor said.

The weaknesses in the manufacturing sector, however, was not broadbased but was limited to specific sectors such as petroleum, iron and steel, and cement.

“Going forward, high-frequency indicators that the slowdown in economic activity bottomed out in Q2, and it has since recovered, aided by strong festive demand and pick up in rural activities,” the RBI Governor said.

Agricultural growth is supported by healthy Kharif crop, healthy reservoir levels and better Rabi sowing, Mr. Das said.

Industrial activity is also expected to normalise and recover from the lows of the previous quarter. The end of the monsoon season and the expected pick up in government capital expenditure is also expected to support cement as well as iron and steel sectors.

Mining and electricity are also expected to improve after monsoon-related disruptions. I specifically mention these sectors because they were the ones that were the principal factors in pulling down Q2 GDP growth.

The Services sector continues to grow at a strong pace. On the demand side, rural demand is trending upwards, while urban demand is showing some moderation on a high base.Government consumption is improving and investment activity is also expected to improve. On the external front, merchandise exports grew 17.2% in October, while services exports continue to post upbeat growth at 22.3% in October.

“Taking all these factors into consideration, real GDP growth in 2024-25 is now projected at 6.6%, with Q3 at 6.8% and Q4 at 7.2%, “ Mr. Das said.

Shaktikanta Das, Governor, Reserve Bank of India. File.
| Photo Credit: Thulasi Kakkat

 The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday (December 6, 2024) decided to keep the policy repo rate unchanged at 6.50% for the 11th consecutive time.

The last time the MPC had increased rates to 6.5% was in February 2023. 

The MPC also decided unanimously to continue with the neutral stance and to remain unambiguously focused on a durable alignment to the 4% target of inflation while supporting growth.

The MPC took note of the recent slowdown in growth momentum which translates into a downward revision of the growth forecast of this year. The second half of this year and next year growth outlook remains resilient but warrants monitoring.

Governor Shaktikanta Das announced the central bank’s decision on policy rates in the RBI’s concluding day Monetary Policy Committee (MPC) meeting on Friday. “India’s economy has been growing healthily in the last 3 years. It is always the effort of the RBI and the MPC to follow the mandate in letter and spirit,” he said while making the announcement.

Monetary policy is important because it affects the life of people, each and every segment of the economy, howsoever small or big, from vegetable vendors to middle class to corporates, farmers, and industry and business and it has wide ranging implications

“Our effort is to follow the flexible inflation targeting framework as provided in the RBI Act and the RBI’s mandate is to maintain price stability while supporting growth. Price stability is important for every segment of the economy. At the same time, growth is also very important.”

Stating that the last mile of disinflation is turning out to be prolonged and arduous for both emerging and developed economies, he said in India, notwithstanding the recent aberration in growth and inflation trajectories, the economy continues its journey on a sustained and balanced path towards progress.