New Delhi: RBI Governor Shaktikanta Das said the MPC on Thursday, August 8, 2024, to maintain the repo rate at 6.5 per cent for the 9th straight cycle. The RBI governor said India is expected to clock 6.5 per cent GDP in FY25 and 4.5 per cent inflation, indicating that the repo rate may remain higher for longer.
Inflation forecast
RBI Governor Das said inflation numbers are expected to moderate in the third quarter with a favourable Monsoon, expectations of positive crop sowing and substantial output forecasted for the kharif season. However, inflation is unlikely to meet the RBI’s 4 per cent target soon, he said.
He said that food inflation remained stubborn, core inflation offered a breather. Food inflation is 46 per cent of the CPI kitty but made up for 75 per cent of headline inflation, he said.
The RBI governor also said to keep a close watch on milk prices and mobile tariffs.
While Q1Fy25 inflation stood at 4.9 per cent, India’s inflation in the subsequent quarters is expected to be as follows:
Q2: 4.4 per cent
Q3: 4.7 per cent
Q4: 4.3 per cent
Q1FY26: 4.4 per cent
Das warned that inflation must be watched closely since food inflation may have a spillover effect on core prices, leading to second-round inflation.
GDP numbers
Das said economic activity in India is expected to remain on an even footing backed by continued government capex, improvement in corporate earnings and a revival in rural demand. However, the Q1 real time GDP forecast had been revised since performance in all the three aspects listed above was lower than expected as well as lower core industrial output, said Das.
Here’s the quarterly GDP forecast for FY25 and Q1FY26:
7.2% GDP in FY25
Q1: 7.1 from
Q2: 7.2
Q3: 7.3
Q4: 7.2
Q1FY26: 7.2%
alternative investment avenues
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Warning to banks
Das warned banks to stay away from unconventional capital raising avenues and focus on raising money using retail savings, which indicates that FD rates may turn higher.
He said that excess leverage in the system in retail category loans must be checked and tops on home and gold loans must be closely watched to avoid future stress.
Lastly, banks must make provisions to avoid the disruptions that were seen after the global Microsoft outage last month, said Das.
RBI Monetary Policy highlights: RBI Governor Shaktikanta Das gave the GDP and inflation forecast for full-year FY25 while warning banks against letting their guard slip in terms of financial stability. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
