The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) maintained the repo rate at 6.5% for the tenth consecutive meeting on October 9, 2024, with five out of six members voting in favor of the status quo. However, the MPC unanimously shifted its policy stance from “withdrawal of accommodation” to “neutral”, allowing flexibility in adjusting interest rates in response to inflation trends. The RBI’s Standing Deposit Facility (SDF) rate remains at 6.25%, and the Marginal Standing Facility (MSF) and bank rates stand at 6.75%.
RBI Governor Shaktikanta Das emphasized that India’s domestic growth has remained strong, although global risks from geopolitical tensions and financial market volatility continue. The shift to a neutral stance provides the central bank with greater flexibility in responding to inflationary pressures in the coming months.
GDP Growth Outlook
The RBI maintained its GDP growth forecast for FY25 at 7.2%, with minor upward revisions for Q3 and Q4 of FY25 to 7.4%. It projects Q1 FY26 growth at 7.3%, reflecting optimism for sustained growth, driven by strong performance in the services sector, despite signs of a slowdown in manufacturing.
Inflation Projections
Inflation remains a key focus for the RBI. The MPC expects CPI inflation to rise to 4.8% in Q3 FY25, before declining to 4.2% in Q4 and 4.3% in Q1 FY26. Inflation in July and August 2024 dropped sharply to 3.6% and 3.7%, respectively. However, food price inflation and adverse base effects are expected to push September inflation higher, with food inflation expected to ease by Q4 FY25 following improved agricultural output from the kharif and rabi seasons.
Concerns and Risks
Das warned of risks from unexpected weather events and geopolitical tensions, which could drive inflation higher. The central bank remains cautious, but its neutral stance signals preparedness to act in either direction as inflationary trends evolve.
