RBI holds repo rate at 6.5%,GDP likely to grow at 7%

Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced the first monetary policy of the financial year 2024-25. The two-day review meeting of the RBI's Monetary Policy Committee (MPC), the rate-setting panel, commenced on April 3 and concluded Friday, April 5.The RBI's Monetary Policy Committee (MPC) has decided to keep the policy repo rate unchanged at 6.5% as retail inflation continues to be above its target of 4 per cent. This is the seventh meeting on the trot that the MPC has maintained a status quo on the repo rate (the interest rate at which banks draw funds from RBI to overcome short-term liquidity mismatches). In FY25, India’s GDP is projected to grow at 7%. According to the central bank, the retail inflation is projected to be at 4.5% in the current financial year.
Robust growth prospects allow the MPC enough room to focus on inflation and allow it to move towards the target of 4%. Monetary policy must continue to be actively disinflationary, Shaktikanta Das said.The rate increase cycle was paused in April last year after six consecutive rate hikes aggregating to 250 basis points since May 2022.He said MPC will remain watchful of food inflation.
With optimistic projections for GDP growth and inflation stability in FY25, Governor Das reaffirmed the central bank's commitment to supporting India's journey towards sustained recovery. As the country strives to capitalize on emerging opportunities and address evolving risks, effective monetary policy interventions will remain pivotal in steering India's economic trajectory towards resilience and prosperity.

(Ira Singh, Asstt Editor, Gandhinagar)