The RBI cited the favourable agricultural crop outlook which could ease food inflation pressures, subject to weather risks. File photo
| Photo Credit: REUTERS

The Reserve Bank of India (RBI) has projected India’s real GDP growth for FY25 at 7.2 per cent, while CPI inflation for the fiscal year is expected to moderate to 4.5 per cent, post Monetary Policy Committee (MPC) meeting on Wednesday (October 9, 2024).

Also read:Account verification facility for NEFT, RTGS soon: RBI

Mr. Das said, “Real GDP growth for 2024-25 is projected at 7.2 per cent. With Q2 at 7 per cent, Q3 at 7.4 per cent and Q4 7.4 per cent. Real GDP growth for Q1 of next financial year that is 2025-26 is projected at 7.3 per cent and the risks are evenly balanced.

According to RBI Governor Shaktikanta Das, growth for the fiscal year will be supported by robust quarterly performances.

However, Inflation in the third quarter is forecasted a little higher at 4.8 per cent, with further moderation anticipated in the fourth quarter when the kharif harvest comes.

However, RBI cautioned that the agricultural output remains susceptible to weather-related shocks, which could influence inflationary trends.

In contrast of India’s Gross Domestic Product (GDP) growth for the first quarter of FY25, Mr. Das said, “Real GDP grew by 6.7 per cent in the first quarter of this financial year, that is, 2024-2025, and this was led by a revival in private consumption and improvement in investment. The share of investment in GDP reached its highest level since 2012-2013. Government expenditure, on the other hand, contracted during the first quarter.”

“On the supply side, gross value added, that is, GVA, expanded by 6.8 per cent, surpassing the GDP growth, aided by strong industrial and services sector activities. High-frequency indicators available so far suggest that domestic economic activity continues to be steady,” Mr. Das added.

On the liquidity front, surplus conditions prevailed in August, September, and early October, though liquidity levels shifted back in late September. However, the agriculture and services sectors remained strong, and government consumption showed signs of improvement. Private investment intentions are also improving, reflecting growing confidence in the economy. Mr. Das said, “MPC noted that currently, the macroeconomic parameters of inflation and growth are well balanced.

Reserve Bank of India (RBI) Governor Shaktikanta Das delivers the Monetary Policy statement, in Mumbai. File photo
| Photo Credit: PTI

 The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday (October 9, 2024) decided to keep the policy repo rate unchanged at 6.50% for the 10th consecutive time.

Of the six members of the MPC, five voted in favour of the decision, which is aimed at taming inflation.

The last time the MPC had increased rates to 6.5% was in February 2023. 

Taking various factors into consideration the MPC has projected real GDP growth for 2024-25 to 7.2%. This number remains unchanged from the last projection.

Governor Shaktikanta Das announced the central bank’s decision on policy rates in the RBI’s concluding day Monetary Policy Committee (MPC) meeting on Wednesday. “The Flexible monitory policy framework has completed 8 years. This is major structural reform, “ Mr. Das said in a statement.

When asked what do these inflation and growth trends mean for monetary policy, Mr. Das cited the favourable agricultural crop outlook which could ease food inflation pressures, subject to weather risks. “Core inflation is expected to remain broadly moderate. It is with a lot of effort that the inflation horse has been brought to the stable. we must be careful about opening the gate lest the horse bolts,” he said.

The RBI changes stance of monetary policy to ‘neutral’ from withdrawal of accomodation, Mr. Das said.

The yields on 10 year government bonds softened over the past two months, due to many factors, including the policy shift by the US Federal Reserve and accelerated domestic fiscal consolidation, the RBI Governor said..

On the forex front, Mr. Das said the Indian Rupee remained the least volatile, till October 8, 2024.

On NBFCs

While stressing that the health parameters of banks and the Non-Banking Financial Company (NBFC) sector continued to be strong, Mr. Das said continued attention needs to be given also to potential risks from mule accounts, inoperative accounts and cyber risks.

“NBFCs in particular have registered an impressive growth over the last few years. While the overall sector remains healthy, I have a few messages to a few outliers that are aggressively building up growth without adequate risk management. A growth at any cost approach would be detrimental,” the RBI Governor said.

“Some are chasing excessive returns in equity, concerns arise when interest rates they charge is usurious and accompanied by high processing fees and other charges. The consequent high cost and high indebtedness could pose financial stability risks if not addressed by these NBFCs in time,” Mr. Das said in a cautious tone.

While stressing that the RBI would not hesitate to act if needed, Mr. Das advocated ‘self-correction’ by NBFCs as a a preferred option.

The RBI Governor remained confident of meeting the external financing requirements comfortably. “FPI flows have rebounded from the outflows of $4.2 billion in April and May and FDI flows remain strong,” he added.

Safeguarding consumers

To safeguard consumer interests, the RBI proposed to broaden the scope of curbs on pre-payment penalties. It is being extended from individual borrowers of non-business loans, to loans availed by micro and small enterprises or MSEs as well.

To avoid wrongful credits and fraud, the RBI will now allow the account holder making a transfer to a beneficiary to verify the latter’s account, a similar feature will now be enabled for NEFT and RTGS, like the UPI and IMPS, Mr. Das said.

Finally quoting Mahatma Gandhi, Mr. Das said “When the method is good, success is bound to come in the end”.

The meeting, which began on October 7, has garnered significant attention, as the RBI has maintained the repo rate at 6.50% for the past nine consecutive meetings, adopting a cautious stance to balance inflationary concerns with the need for economic growth.

Earlier on August 8, 2024, in its first meeting after the Union Budget, the RBI’s Monetary Policy Committee (MPC) kept the policy repo rate unchanged at 6.50% for the ninth consecutive time.

(With inputs from agencies)