Update from the RBI MPC: The projection for the repo rate and GDP is at 6.5%
The RBI on Thursday kept its GDP growth forecast for the current fiscal year at 6.5% while slightly increasing its inflation forecast to 5.4% in response to an increase in vegetable costs, notably tomatoes.
Reserve Bank Governor Shaktikanta Das revealed the bi-monthly monetary policy and said that the domestic economy is continuing to be resilient.
Aside from that, he said that home spending should be supported by the improvement in kharif sowing and rural incomes, the booming services sector, and consumer confidence.
But there are dangers to the picture, according to Das: “Headwinds from weak global demand, volatility in global financial markets, geopolitical tensions, and geoeconomic fragmentation.”
Real GDP growth is predicted to be 6.5% in 2023–2024 when all these variables are taken into account, with Q1 seeing an increase of 8%, Q2 of 6.5%, Q3 of 6%, and Q4 of 5.7%.
The first quarter of 2024–2025 is expected to have real GDP growth of 6.6%.
The governor predicted that the rise in vegetable costs, driven mostly by tomato prices, will put significant upward pressure on the trajectory of headline inflation in the short future.
He said, “This jump is, however, likely to correct with fresh market arrivals,” noting that the pace of the monsoon and kharif sowing in July had significantly improved.
Das noted that rigorous monitoring is necessary in order to determine the consequences of the unequal rainfall distribution.
According to the governor, retail inflation based on the Consumer Price Index (CPI) is expected to be 5.4% in 2023–2024.
With risks equally distributed, the expected CPI for the second quarter is 6.2%, followed by 5.7% for the third quarter and 5.2% for the fourth.
Retail inflation is anticipated to be 5.2% in Q1 2024–2025.
Headline The CPI increased from 4.3% in May to 4.8% in June, mostly due to changes in food group dynamics brought on by rising prices for vegetables, eggs, meat, fish, cereals, pulses, and spices.
