RBI Monetary Policy: Shaktikanta Das assures to keep 'close vigil' on inflation
RBI Governor Shaktikanta Das maintained the repo rate at 6.5% due to ease in inflation in India; inflation is likely to be shaped by ‘food price dynamics’.
PremiumRBI Governor Shaktikanta Das on Thursday said that India's headline inflation is likely to be shaped by "food price dynamics". During the monetary policy meeting, the Reserve Bank of India Governor maintained the repo rate at 6.5% due to ease in inflation in the country. The RBI had hiked the repo rate by 250 basis points since May last year.
However, for the second consecutive time, RBI paused the repo rate at 6.5% on Thursday. Governor Das pegged India's GDP growth for fiscal year 2024 at 6.5% and inflation at 5.1%. Quarter-wise, Das estimated inflation for Q1 at 4.6%, Q2 at 5.2%, Q3 at 5.4%, and Q4 at 5.2%, respectively.
CPI inflation fell sharply to 4.7% in April 2023 from 6.4% in February on the back of favourable base effects.
According to Governor Das, food group inflation eased with moderation in cereals, eggs, fruits, fish, and prepared meals inflation and deepening of deflation in edible oils. In the fuel group, inflation in LPG and firewood prices fell and kerosene prices slipped into deflation. Core inflation also dipped.
According to Das, "Wheat prices could see some correction on robust mandi arrival and procurement. Milk prices are likely to remain under pressure due to supply shortfalls and high fodder costs".
According to the RBI's survey, manufacturing, services, and infrastructure firms polled expect input costs and output prices to harden. Das said that the government's thrust on capital expenditure, moderation in commodity prices, and robust credit growth are expected to nurture investment activity.
However, “Weak external demand, geoeconomic fragmentation, and protracted geopolitical tensions, pose risks to the outlook," he said.
He said that headline inflation is projected to decline in FY2024 from its level in 2023 but would still be above the target, warranting continuous vigil.
"The MPC resolved to continue keeping a close vigil on the evolving inflation and growth outlook. It will take further monetary actions promptly and appropriately as required to keep inflation expectations firmly anchored and to bring down inflation to the target," Das assured. The MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth," RBI Governor said in a media statement.
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