The Reserve Bank of India’s Monetary Policy Committee (MPC) unanimously decided to keep key interest rates unchanged and retained its inflation projection for this year at 5.4%, but raised its GDP growth projection for 2023-24 to 7% from 6.5% forecast earlier.
The central bank’s Governor Shaktikanta Das flagged that the recent price rise in some vegetables may spike the retail inflation rate in November and December from the four-month low of 4.87% recorded in October, and the MPC remains highly alert and ready to take appropriate actions.
“We have made significant progress in bringing inflation below 5% despite intermittent blips… The target of 4% inflation is yet to be reached and we have to stay the course. Headline inflation remains volatile due to supply shocks,” the Governor said.
While food inflation has moderated from double digit levels of July to 6.2% in October, the Governor said the inflation outlook would be considerably influenced by uncertain food prices. “While monetary policy may look through one-off shocks, it has to keep an eye on ensuring food inflation spikes don’t become generalised,” Mr. Das said.
“An increase in vegetable prices may push CPI inflation higher in coming months. The crop output of cereals and pulses needs to be monitored and elevated sugar prices in the world are also a matter of concern,” he stressed.
Upgrading its growth forecast, the MPC now reckons that the real GDP growth for 2023-24 would be 7%, with the third quarter clocking 6.5% growth and the fourth quarter 6%. It also projected growth and inflation numbers for the first three quarters of 2024-25.
“Real GDP for the Q1 of 2024-25 is projected at 6.7%, Q2 at 6.5% and Q3 at 6.5%, with risks evenly balanced… On the assumption of normal monsoons, Consumer Price inflation is projected at 5.4% for this year, with the Q3 at 5.6% and Q4 at 5.2%… Q1 of 2024-25 is projected at 5.2%, Q2 at 4% and Q3 at 4.7%. The risks are evenly balanced,” Mr. Das said.
Based on the central bank’s unchanged inflation projections for the current quarter, November and December may record an average inflation of 5.95%.
The governor emphasised that amid a global economy clouded by uncertainties, India remains better placed to withstand their impact than its emerging economy peers and monetary policy actions and communication can be a stabilising force to anchor expectations in times of such high volatility as has been witnessed through the last two years.
“As India treads the path to a brighter future, I recall the wise words of Mahatma Gandhi: ‘Progress is absolutely assured whenever there is an unalterable determination.’,” the Governor said in conclusion, noting that there are congenial conditions in place for sustained growth of the Indian economy.