The status quo maintained by the monetary policy committee (MPC) of the Reserve Bank of India (RBI) on interest rates sprung no surprise, given the caution that a hazy economic horizon tends to induce. At 5.25%, RBI’s repo rate stays unchanged, as does its neutral stance.
But the MPC’s brighter growth and inflation outlook makes for two cheers. Real GDP expansion is seen at 6.7% in 2027-28, up from 6.6%. Thank the economy’s resilience. Retail inflation is now projected at 5% in 2027-28, down from 5.1%. This exceeds RBI’s 4% target, but didn’t nudge the MPC to hike rates.
It doesn’t expect pressures from volatile food and fuel prices to generate overall price instability, which may have led it to keep rates steady for the sake of growth. This hypothesis will be tested in the months ahead. The MPC’s disposition seems to echo the US Fed’s unstated position.
Yet, as risks seem less ‘evenly balanced’ than made out, with a war in West Asia that’s far from over, it would appear that the classic role of central banks, dedicated to keeping the real value of the currencies under their charge stable, isn’t as strongly backed by inflation-targeting regimes as the idea’s advocates argue.