Majority of Reserve Bank of India (RBI)'s monetary policy committee members expressed caution on upside risks to inflation, particularly emanating from uncertainties in food prices, at the panel's policy review, showed the minutes of the meeting on April 19.
In March, India's retail inflation eased to a ten-month low of 4.85 percent, as against 5.09 percent in February. This data was released by the Ministry of Statistics and Programme Implementation on April 12.
The inflation numbers were lowest since May 2023, when it was at 4.31 percent.
Here is what governor, deputy governors and external members said on inflation, growth and interest rates.
Also read: MPC Minutes: Inflation concerns continue to dominate policy review
On interest rates
The Monetary Policy Committee of the RBI in April kept repo rate unchanged at 6.50 percent for the seventh time in a row with its focus firmly on bringing inflation down.
Shashanka Bhide, Ashima Goyal, Rajiv Ranjan, Michael Debabrata Patra and Shaktikanta Das voted to keep the policy repo rate unchanged at 6.50 per cent. However, Jayanth R. Varma voted to reduce the policy repo rate by 25 basis points.
“Despite an uptick in crude oil prices, the outlook for inflation continues to be benign, and I remain convinced that a real interest rate of 1-1.5 percent would be sufficient to glide inflation to the target of 4 percent,” said Jayanth R. Varma.
Varma added that the current real policy rate of 2 percent (based on projected inflation for 2024-25) is therefore excessive.
Further, RBI Governor Shaktikanta Das said the strong growth momentum, together with our GDP projections for 2024-25, give us the policy space to unwaveringly focus on price stability. Price stability is our mandated goal and it sets strong foundations for a period of high growth.
On inflation
On the inflation front, RBI governor said that lingering geo-political tensions and their impact on commodity prices and supply chains are also adding to uncertainties in the inflation trajectory.
Adding to this, Patra said some global food prices are firming up in an environment of rising input costs and supply chain pressures. The headroom provided by the steady core disinflation and fuel price deflation does not assure a faster alignment of the headline with the target.
“Consequently, headline inflation can be expected to remain in the upper reaches of the tolerance band until favourable base effects come into play in the second quarter of 2024-25,” Patra added.
Rajiv Ranjan said while low core inflation would further the disinflation process, concerns remain on food inflation outlook. We need to remain watchful on upside risks to inflation outlook from adverse climatic factors, supply side shocks and geopolitical events.
Also read: India's retail inflation eases to a 10-month low of 4.85% in March
On growth
Das said the growth prospects of the Indian economy in 2024-25 look bright. Expectations of normal southwest monsoon in 2024 augur well for the agricultural sector and rural demand. Strengthening rural demand, along with rising consumer confidence and optimism on employment and income, are expected to boost private consumption.
Shashanka Bhide further said The prevailing macroeconomic conditions point to a continuation of the strong growth momentum into 2024-25, particularly as a normal monsoon brings relief to the outlook for agricultural sector.
“A favourable monsoon is also crucial in bringing down the present high levels of food inflation rates, which would also support consumption demand in the rural economy,” Bhide added.
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