Unmesh Kulkarni – Managing Director Senior Advisor, Julius Baer India

As was widely expected by markets and analysts, the RBI Monetary Policy Committee (MPC) kept rates unchanged, yet again. This is the 8th consecutive policy that the RBI MPC has been on hold.

The MPC members voted 4:2 in favour of keeping rates on hold as well as the policy stance unchanged (withdrawal of accommodation). A large part of the Governor’s address focused on the MPC’s continued commitment to and focus on containment of inflation.

Overall, the MPC is quite comfortable with the evolving trajectory of growth and inflation. The MPC has, surprisingly, actually raised the FY 2024-25 GDP forecast from 7.0% to 7.2%, citing various trends around sustained economic momentum, manufacturing activity gaining ground, increasing investment activity, improving bank credit and a buoyant services sector. The RBI is also drawing some comfort from the steady recovery in private consumption (urban) and some recovery being observed in rural demand and consumption as well, which should be further aided by a healthy    

The MPC has chosen to keep its inflation forecast for FY 2024-25 unchanged at 4.5%. It draws a good deal of comfort from the core inflation trajectory, which has been on a downward trend for 11 consecutive months. Services inflation and goods inflation have also shown moderation. The RBI’s monetary policy measures as well as supply-side measures undertaken by the Government are having the desired effect on moderating overall inflation.