RBI projects GDP growth at 6.5%, keeps repo rate unchanged

After the three-day deliberations of the Monetary Policy Committee (MPC) of the Reserve Bank of India, Governor Shaktikanta Das on Thursday said the central bank has projected India’s real GDP growth for 2023-24 at 6.5 per cent.
During his speech, the governor said that RBI projected GDP growth in FY24’s first quarter (Q1) at 7.8 per cent; the second quarter (Q2) at 6.2 per cent; the third quarter (Q3) at 6.1 per cent; and the fourth quarter (Q4) at 5.9 per cent. RBI governor said, “Our job is not yet finished and the war against inflation has to continue until we see a durable decline in inflation closer to the target.” On Thursday, RBI’s Monetary Policy Committee announced the decision of keeping the repo rate unchanged at 6.5 per cent after three-day deliberations. Most of the experts had expected that RBI would hike the benchmark interest rate by 25 bps. During the governor’s speech, he also highlighted the forecast for real GDP and inflation in FY24. According to the governor, inflation for 2023-24 is projected to moderate at 5.2 per cent with the consumer price index (CPI) during Q1 at 5.1 per cent, Q2 at 5.4 per cent, Q3 at 5.4 per cent and Q4 at 5.2 per cent. Shaktikanta Das said, “Our monetary policy in the recent period has aimed for a non-disruptive normalisation from the pandemic era stimulus measures. Even as monetary policy moved decisively to the withdrawal of accommodation, financial conditions evolved in line with the productive requirements of the economy.” The governor said, “Inflation has softened from its elevated levels a year ago; however, it still remains above the upper tolerance band.” According to Shaktikanta Das, projections for 2023-24 point to a softening in inflation, though the disinflation is likely to be gradual and protracted, given the rigidity in core or underlying inflation pressures. At this stage, the governor said the RBI remains watchful of the evolving outlook and the impact of our actions during the past year on the broader real economy. He said, “While we have kept the policy rate unchanged, it is important to bear in mind that this decision was taken on the basis of our assessment of the macroeconomic and financial conditions with reference to the information available up to today.” The governor added, “We are confident that we are on the right track to bring down inflation to the target rate over the medium term.”