RBI monetary policy: FY25 growth forecast revised to 7.2%, up from 7%

Monetary Policy Committee keeps repo rate unchanged at 6.50% for an eighth straight policy meeting

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Friday revised the growth forecast for the financial year 2024-2025 (FY25) to 7.2 per cent from the earlier projection of 7 per cent.

Quarterly, the real gross domestic product (GDP) in Q1 was projected at 7.3 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent, and Q4 at 7.2 per cent, against the previous projections of 7.1 per cent, 6.9 per cent, 7 per cent, and Q4 at 7 per cent.

With a majority of 4-2, the rate-setting panel kept the repo rate unchanged at 6.5 per cent in its first meeting of FY25. The MPC also decided to keep its stance of "withdrawal of accommodation" unchanged.

“As anticipated, the RBI maintained its key policy rates and liquidity stance unchanged. The RBI revised its annual GDP growth estimate upward for the current year while keeping the retail inflation forecast steady. Several indications from the governor's speech suggest that the RBI is unlikely to commence rate cuts soon. The upward revision in growth, the expectation of a non-linear disinflationary process, and a clear signal that the RBI will not mirror the (US) Federal Reserve's anticipated monetary policy easing, imply that a rate cut in 2024 is improbable,” said Sujan Hajra, chief economist & executive director at Anand Rathi Shares and Stock Brokers.

RBI governor Shaktikanta Das, in his monetary policy statement, said that while the MPC took note of the disinflation achieved so far without hurting growth, it remains vigilant to any upside risks to inflation, particularly from food inflation, which could derail the path of disinflation.

“RBI’s status quo on rates and stance was in line with market expectations, but the split in voting patterns clearly shows the increasing probability towards a pivot in the policies ahead. However, we believe the robust growth will give enough opportunity for the MPC to remain on a wait and watch mode until better clarity comes from monsoons and the quality of expenditure from the Budget. We see room for stance change in the August policy with a plausible easing from the October meeting," said Upasna Bhardwaj, chief economist, Kotak Mahindra Bank.