The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) met from December 4-6, 2024 and decided to keep the policy repo rate unchanged at 6.50%. As a result, the standing deposit facility (SDF) rate remains at 6.25%, and the marginal standing facility (MSF) rate and Bank Rate stay at 6.75%. The MPC also maintained a neutral monetary policy stance, aiming for inflation to align with the medium-term target of 4% within the band of +/- 2%, while supporting economic growth.

Key Economic Outlook:

• Global Economy: Stable with growth continuing despite slowing inflation, though geopolitical risks and policy uncertainties add volatility to global markets.
• Domestic Economy: India’s GDP grew 5.4% in Q2 of 2024-25, lower than expected due to weaker private consumption and investment. However, a recovery in government spending, along with resilient services and agriculture, is expected to support growth. Real GDP growth for FY 2024-25 is projected at 6.6%.
• Inflation: Headline CPI inflation increased to 6.2% in October 2024, driven by food inflation and a rise in core inflation. CPI inflation for FY 2024-25 is projected at 4.8%, with a slight reduction in Q4. Risks to inflation include weather events, rising agricultural commodity prices, and geopolitical factors.

MPC’s Rationale:

• The MPC acknowledged that inflation and growth outcomes have worsened since the October policy, but economic activity is expected to improve.
• High inflation is a concern, as it erodes purchasing power, particularly in rural and urban areas.
• The committee emphasized that stable prices are crucial for sustained high growth.
• The neutral stance was maintained to allow flexibility in responding to future developments in inflation and growth.

Voting:

• Four members, including the RBI Governor, voted to keep the repo rate unchanged.
• Two members voted for a 25 basis points rate cut.
• The next MPC meeting is scheduled for February 5-7, 2025.

The minutes of the meeting will be published on December 20, 2024