RBI Policy: India’s real GDP growth for FY25 projected at 7%

In line with market expectations, the Reserve Bank of India (RBI) maintained its benchmark interest rate (repo rate) at 6.5% during its sixth bi-monthly policy announcement for the financial year 2023–24, following a 3-day meeting. This was the sixth time that RBI left rates unchanged, and notably for the entire FY24, the repo rate stood at 6.5%.

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

"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 RBI Governor Shaktikanta Das.

The status quo decision by the MPC aimed to support the objective of achieving a consumer price-based inflation (CPI) target of 4%.

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During the first bi-monthly policy in April of FY24, the RBI made a surprising decision to keep its benchmark rate unchanged at 6.5% after delivering six consecutive hikes that began in May 2022 and continued till February 2023, pushing the repo rate to 6.5% with a 250-basis point hike.

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On the growth front, the RBI projects a 7% real GDP growth for the upcoming financial year 2024–25 from the previous projection of 6.6%. This projection includes a growth rate of 7.2% in Q1, 6.8% in Q2, 7% in Q3, and 6.9% in Q4. 

Meanwhile, in the second quarter of the fiscal year 2023-24 (Q2FY24), the GDP growth expanded to 7.6%, exceeding analysts' expectations.

The projected CPI inflation rate for the current year, 2023-2024, stands at 5.4%, with the fourth quarter (Q4) projection at 5%. Looking ahead to the next financial year, FY25, the projected inflation rate is estimated to be 4.5%, with projections for each quarter as follows: Q1 at 5%, Q2 at 4%, Q3 at 4.6%, and Q4 at 4.7%.

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