RBI Monetary Policy: Raises FY25 real GDP growth forecast to 7.2% from 7%

The Reserve Bank of India, in its June monetary policy, has raised its real GDP growth forecast for the current financial year 2024–25 (FY25) to 7.2 percent from 7 percent earlier. This comes after, in the fiscal year 2023-24 (FY24), the GDP growth expanded to 8.2 percent, exceeding analysts' expectations.

In line with market expectations, the RBI maintained its status quo on the benchmark interest rate (repo rate) at 6.5 percent during its second bi-monthly policy announcement for the financial year 2024–25. A 4:2 majority decided to keep the repo rate unchanged. This was the eighth time that RBI left rates unchanged, and notably for the entire FY24, the repo rate stood at 6.5 percent. It also decided to remain focussed on 'withdrawal on accommodation'.

Read here: RBI monetary policy: Inflation to growth outlook - 5 key highlights

The RBI began its three-day monetary policy committee (MPC) meeting on June 5. The last time RBI hiked its interest rate was in February 2023.

In addition, RBI Governor Shaktikanta Das-headed MPC also left standing deposit facility (SDF) and marginal standing facility (MSF) rates unchanged at 6.25 percent and 6.75 percent, respectively.

The MPC also raised its GDP growth projections for each of the 4 quarters of FY25. For the first quarter of FY25, the RBI now expects a GDP growth of 7.3 percent from 7.2 percent earlier. Similarly, it increased its GDP forecast to 7.2 percent in Q2FY25 from 6.8 percent earlier. For Q3, it raised GDP growth projection to 7.3 percent from 7 percent earlier and for the fourth quarter MPC raised its GDP forecast to 7.2 percent from 6.9 percent.

Read here: RBI monetary policy: MPC keeps FY25 inflation forecast unchanged at 4.5%

Meanwhile, the MPC retained its FY25 inflation projection at 4.5 percent. Individually for each quarter, the RBI projected inflation at 4.9 percent in Q1, 3.8 percent in Q2, 4.6 percent in Q3, and 4.5 percent in Q4.

In April of FY24, during its first bi-monthly policy review, the RBI unexpectedly decided to keep the benchmark rate steady at 6.5 percent. This pause followed a series of six consecutive rate hikes that began in May 2022 and extended through February 2023, cumulatively raising the repo rate by 250 basis points to 6.5 percent.

Read here: RBI Monetary Policy: Repo rate unchanged at 6.5%, says Governor Shaktikanta Das

“MPC remains vigilant to outside risks to inflation, particularly food inflation as it could delay the path of disinflation,” said Shaktikanta Das.