In its October 2024 monetary policy meeting, the Reserve Bank of India (RBI) decided to maintain the repo rate at 6.5%, marking the tenth consecutive meeting where the rate has been left unchanged. However, in a notable shift, the Monetary Policy Committee (MPC) unanimously changed its stance from “withdrawal of accommodation” to “neutral,” indicating that future interest rate decisions will be more flexible and based on evolving economic conditions.
RBI Governor Shaktikanta Das highlighted that the decision to maintain the repo rate was driven by concerns over global economic uncertainties, including geopolitical tensions, financial market volatility, and elevated public debt levels. Despite these risks, India’s domestic economy has shown resilience, with real GDP growing by 6.7% in Q1 of FY25. The central bank maintained its GDP growth projection at 7.2% for the full fiscal year, signaling continued confidence in the country’s growth trajectory.
Focus on Inflation and Growth
While the GDP growth outlook remains strong, the RBI remains cautious about inflation. Inflation projections for FY25 are expected to fluctuate, particularly with a forecasted rise in food prices and other cost pressures. The RBI’s CPI inflation projection for Q2 is 4.1%, with an anticipated increase to 4.8% in Q3, followed by a moderation to 4.2% in Q4. The central bank cited concerns over global food and metal prices, as well as weather disruptions, as potential risks to inflation control.
Governor Das emphasized that the neutral stance allows the RBI to respond to inflation trends more flexibly. Unlike the previous “withdrawal of accommodation” stance, which focused solely on tightening, a neutral approach enables the central bank to adjust rates upwards or downwards as required, depending on inflationary pressures and growth dynamics(
Overall, the decision underscores the RBI’s balanced approach to navigating global uncertainties while ensuring that India’s domestic economy remains on a steady growth path. The central bank’s focus will remain on controlling inflation while supporting economic expansion, leaving room for potential policy adjustments in the near future.