RBI MPC Outcome: Governor Das retains India’s real GDP growth projections for FY25 at 7.2%

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) maintains its growth forecast for the Indian economy at 7.2% for FY25. While the committee has moderated its growth outlook for the second quarter, it has raised expectations for the last 2 quarters of FY25 and the first quarter of FY26. RBI Governor Mr. Shaktikanta Das emphasized that India’s growth story remains robust, driven by increasing consumption and investment demand. He noted, "Prospects of private consumption, the mainstay of aggregate demand, look bright due to improved agricultural outlook and rising rural demand. Sustained buoyancy in services will also support urban demand. Government expenditure at the centre and state levels is expected to gain momentum in line with Budget Estimates." The MPC has revised its growth forecast for the second quarter of FY25 to 7% from 7.2% previously, while projecting third quarter of FY25 and fourth quarter of FY25 growth at 7.4% (up from 7.3%) and first quarter of FY26 growth at 7.3% (up from 7.2%). India's growth rate for FY24 stood at 8.2%.

In its recent decision, the RBI MPC kept the repo rate unchanged at 6.5%, shifting its stance from ‘withdrawal of accommodation’ to ‘neutral.’ 5 of the 6 members voted to maintain the rates, with all members supporting the change in policy stance. He highlighted the momentum of domestic growth, noting that private consumption and investment are progressing concurrently. He stated, "Resilient growth allows us to focus on inflation to ensure its sustainable decline towards the 4% target." He observed, "The MPC noted that the current macroeconomic parameters of inflation and growth are well balanced. While headline inflation is on a downward trajectory, its pace has been slow and uneven. The moderation in headline inflation is expected to reverse in September, likely remaining elevated in the near term due to adverse base effects and other factors."

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