The first monetary policy announcement for the fiscal year 2024–25 was made by Governor Shaktikanta Das of the Reserve Bank of India (RBI). The key policy repo rate was kept at 6.5% for the seventh consecutive time by the Monetary Policy Committee (MPC), which sets interest rates. The PC wrapped up its two-day review meeting on April 5. Additionally, the MPC determined to stick with the policy of “withdrawal of accommodation.”
RBI’s Financial Forecasts
The RBI expected that India’s real GDP growth rate would be 7% in FY25, and that the country’s Consumer Price Index (CPI) inflation rate would be 4.5%. Governor Das stuck to the February data when reiterating the CPI inflation forecast for FY25.
Concerns and Prognosis about Inflation
Inflationary pressures were brought to light in February, especially with regard to food costs. The MPC is still on the lookout for inflation’s upside risks. Governor Das stressed that inflationary expectations could be disturbed by persistently high food inflation.
Elements That Impact Growth
A typical south-west monsoon, predicted by the RBI, should support agricultural output. It is anticipated that manufacturing will continue to grow and prosper.
Management of Foreign Exchange Risk
The Reserve Bank of India’s foreign exchange risk management policy is unchanged. Market participants are required to hedge their underlying exposure. Deputy Governor Patra emphasised adherence to regulations and issued an advisory against abusing relaxation by presuming no underlying exposure.
Evaluation and Prospects
It is seen as reasonable that the RBI chose to keep the repo rate and policy stance unchanged in the face of geopolitical unpredictability and probable climate effects. If inflation continues on its anticipated path, monetary policy easing might be taken into consideration in the future. Industry analysts evaluate favourably the freedom allowed to Small Finance Banks (SFBs) to manage interest rate risk through allowed interest rate derivatives.
Conclusion
The monetary policy decision made by the RBI sets the stage for future growth and stability in the economy. The central bank aims to limit inflation while promoting economic activity. It also seeks to take advantage of chances for sustainable growth.
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