The Reserve Bank of India (RBI) has kept the repo rate unchanged for the ninth consecutive time while retaining its growth and inflation forecast for FY25 at 7.2% and 4.5%, respectively.

In its bi-monthly monetary policy announced today, the central bank maintained a status quo on the benchmark mark repo rate at 6.5%. 

The  monetary policy committee (MPC)  also maintained the policy stance of ‘withdrawal of accommodation’ to ensure that inflation progressively aligns to the target while supporting growth, RBI Governor Shaktikanta Das said.

The rate-setting six-member MPC decided on keeping the repo rate unchanged with a 4:2 majority. 

The standing deposit facility (SDF) rate thus remains at 6.25% and the marginal standing facility (MSF) rate and the bank rate stay at 6.75%.

GDP forecast unchanged at 7.2% for FY25

RBI retained its real GDP growth forecast at 7.2% for the current financial year, with Q1 revised marginally down to 7.1% from the earlier projection of 7.3%.

“We have slightly moderated the growth projection for Q1 of the current year primarily due to updated information on certain high-frequency indicators which show lower than anticipated corporate profitability, general government expenditure and core industries output,” said Das, while announcing today the bi-monthly monetary policy.

The GDP growth forecast for Q2 is at 7.2%; Q3 at 7.3%; and Q4 at 7.2%.

The GDP growth for Q1FY26 is projected at 7.2%, with risks evenly balanced.

Das said that improved agricultural activity brightens the prospects of rural consumption, while sustained buoyancy in services activity would support urban consumption.

"The healthy balance sheets of banks and corporates; thrust on capex by the government; and visible signs of pick up in private investment would drive fixed investment activity. Improving prospects of global trade are expected to aid external demand," he said.

The spillovers from protracted geopolitical tensions, volatility in international financial markets and geo-economic fragmentation, however, pose risks on the downside, he said.

Inflation projection unchanged at 4.5%

Assuming a normal monsoon and taking into account the inflation print in Q1, Das said retail inflation for FY25 is projected at 4.5%.

However, the CPI (Consumer Price Index)-based inflation across different quarters has seen some forecast changes. While Q2 FY25 forecast is revised upwards at 4.4% from 3.8% earlier, Q3 is now estimated at 4.7% (from 4.6% earlier) and Q4 at 4.3% (from 4.5% earlier). 

CPI inflation for Q1FY26 is projected at 4.4%, with the risks evenly balanced.

Das said a degree of relief in food inflation is expected from the pick-up in the south-west monsoon and healthy progress in sowing and buffer stocks of cereals continue to be above the norms.

Besides, global food prices showed signs of easing in July, after registering increases since March 2024.

Das said that the headline CPI inflation edged up to 5.1% in June 2024 due to higher-than-expected food inflation.

Fuel remained in deflation for the tenth consecutive month, he said, adding, that core inflation moderated to a historic low in May and June.

The high food price momentum is likely to have continued in July and large favourable base effects may, however, push headline inflation downwards during the month.

The impact of the revision in milk prices and mobile tariffs needs to be watched, he said.

Under the current monetary policy setting, he said, inflation and growth are evolving in a balanced manner and overall macroeconomic conditions are stable.

"Growth remains resilient, inflation has been trending downward and we have made progress in achieving price stability, but we have more distance to cover. The progress towards our goal of price stability has been uneven due to large and persistent supply side shocks, especially in food items," he said.

RBI, therefore, need to remain vigilant to ensure that inflation moves sustainably towards the target, while supporting growth, he said, adding, that this approach would be net positive for sustained high growth.