RBI Monetary Policy: Central bank keeps real GDP growth projection unchanged at 7.2% for FY25

In its third bi-monthly committee meeting for FY24–25, the Reserve Bank of India (RBI) maintained the real GDP growth forecast for the current fiscal year unchanged at 7.2%.

In its June monetary policy, the RBI raised its real GDP growth forecast for the financial year 2024–25 (FY25) from 7% to 7.2%. This adjustment follows the fiscal year 2023-24 (FY24), when GDP growth expanded to 8.2%, surpassing analysts' expectations.

For Q1 FY25, the GDP growth target was revised to 7.1% from 7.3%. The forecast for Q2 FY25 was maintained at 7.2%, while for Q3 FY25 it is set at 7.3%, and for Q4 FY25, it remains at 7.2%.

Looking ahead to Q1 FY26, the RBI projects a GDP growth of 7.2%.

Repo rate unchanged

Regarding policy rates, the RBI decided to maintain the benchmark interest rate (repo rate) at 6.5%, following a three-day meeting. This decision marks the ninth consecutive time the RBI has opted to keep the rate steady.

"The Monetary Policy Committee decided by a 4:2 majority to keep the policy repo rate unchanged at 6.5%. Consequently, the standing deposit facility (SDF) rate remains at 6.25%, and the marginal standing facility (MSF) rate and the bank rate at 6.75%," said RBI Governor Shaktikanta Das.

"The MPC also decided by a majority of five out of six members to remain focused on the ‘Withdrawal of Accommodation’ to ensure that inflation progressively aligns with the target while supporting growth," said Shaktikanta Das.

Inflation forecast unchanged

The RBI has kept its inflation forecast for FY2025 steady at 4.5%, with quarterly projections set at 4.4% for Q2, 4.7% for Q3, 4.3% for Q4, and 4.4% for Q1FY26. RBI Governor Shaktikanta Das noted that risks are currently balanced.

Das also highlighted that headline inflation reached 5.1% in June 2024, surpassing expectations. Food inflation and fuel have remained deflationary for ten consecutive months. Core inflation fell to a historic low in May and June. Food inflation, accounting for approximately 46% of the Consumer Price Index (CPI) basket, drove over 75% of the headline inflation during these months.

A significant rise in vegetable prices contributed about 35% of the inflation in June, with ongoing high inflation pressures affecting other major food items, said Das.