Virendra Pandit
New Delhi: With a majority of five members out of six, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday kept the repo rate unchanged at 6.5 percent in its tenth consecutive bi-monthly meeting.
After its three-day meeting, starting on Monday, the MPC, however, unanimously decided to change its stance from the earlier “withdrawal of accommodation” to “neutral,”, the media reported.
RBI Governor Shaktikanta Das announced that the standing deposit facility (SDF) rate was kept at 6.25 percent, while the marginal standing facility (MSF) rate and the bank rate remained at 6.75 percent.
“Domestic growth has sustained its momentum, and the global economy has remained resilient since our last meeting. However, downside risks persist due to geopolitical conflicts, financial market volatility, and elevated public debt. On a positive note, world trade is showing signs of improvement,” he said in his monetary policy statement.
The RBI’s “neutral” stance allows it to adjust interest rates according to inflation trends, unlike the previous approach of withdrawing accommodation, which ruled out the option of cutting rates.
About the economy, he said India’s real GDP grew by 6.7 percent in the first quarter of this year. For FY25, the RBI kept its gross domestic product (GDP) projection unchanged at 7.2 percent.
The Q2FY25 projection also remained at 7.2 percent as before but was raised for Q3 from 7.3 to 7.4 percent and from 7.2 to 7.4 percent for Q4FY25.
Das underlined that manufacturing is showing signs of slowing down while the services sector remains robust.
He said the MPC decided to remain “watchful” of the evolving outlook in the coming months. “The global economy has remained resilient since the last meeting of the MPC in August,” he said.
The MPC projected inflation at 4.5 percent for FY25, the same as previously forecast. The quarterly Consumer Price Index (CPI) inflation forecast is projected at 4.1 percent in Q2, 4.8 percent in Q3, 4.2 percent in Q4, and 4.3 percent in Q1 of FY26.
The central bank said the headline inflation declined sharply to 3.6 in July and 3.7 percent in August from the earlier 5.1 percent in June. “Going forward, the September inflation print may see a significant pick-up as base effects turn adverse and food prices register an upturn. Food inflation, however, is expected to ease by Q4FY25 on better kharif arrivals and rising prospects of a good rabi season,” he added.
The RBI chief noted that core inflation is likely to stay contained. Current and anticipated inflation trends contributed to the change in stance. The central bank highlighted its efforts to curb inflation, successfully bringing it within the target range.
Das indicated that the September CPI is likely to see a sharp increase, driven by unfavorable base effects and rising food prices. He forecasted that headline inflation would gradually ease in the fourth quarter, but warned that unexpected weather events and geopolitical tensions remain significant risks that could push inflation higher. The recent rise in food and metal prices, if it continues, could heighten the upward risks to CPI inflation.
Earlier this month, the Centre appointed three new external members to the RBI’s six-member MPC. They are economist Saugata Bhattacharya, Nagesh Kumar, Director and Chief Executive of the Institute for Studies in Industrial Development, and Ram Singh, Director of the Delhi School of Economics.
They now serve alongside RBI Governor Shaktikanta Das, Executive Director Rajiv Ranjan, and Deputy Governor Michael Debabrata Patra on the committee.
Bhattacharya, Kumar, and Singh replaced the outgoing members Ashima Goyal, Shashanka Bhide, and Jayanth R. Varma.