In its October 2024 Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) decided to keep repo rates unchanged. This decision follows the recent 50-basis-point rate cut by the U.S. Federal Reserve. Additionally, the RBI shifted its policy stance from ‘withdrawal of accommodation’ to ‘neutral’. The aim of maintaining stable interest rates is to ensure strong economic growth while remaining prepared to address future uncertainties.
Positive Growth Indicators
RBI Governor Shaktikanta Das shared some important projections for India’s economy:
- FY25 Estimate: 7.2%
- Q2FY25: 7.0%
- Q3FY25: 7.4%
- Q4FY25: 7.4%
- Q1FY26: 7.3%
These estimates suggest that the Indian economy is on a steady growth trajectory, with room for further expansion.
Softening of India’s Bond Yield
Governor Das also mentioned that India’s bond yield market will soften following the policy announcement. The yield on 10-year benchmark bonds has fallen by 5 basis points to 6.7434%, a positive outcome of the measures aimed at market stability.
Inflation Estimates
According to Governor Das, inflation could rise to 4.8% in Q3FY25. He also provided the following inflation projections:
- FY25: 4.5%
- Q2: 4.1%
- Q3: 4.8%
- Q4: 4.2%
- Q1FY26: 4.3%
These statistics suggest that while inflation may increase in the coming quarters, it will remain within the targeted range, ensuring a balanced impact on the economy.
Current Account Deficit (CAD) and Investment
India’s current account deficit (CAD) reached 1.1% of GDP in the first quarter. However, strong service exports and robust foreign direct investment (FDI) inflows are expected to keep it under control. External commercial borrowings have moderated, while non-resident deposits have seen higher net inflows compared to the previous fiscal year.
Wrapping Up
The RBI’s stable monetary policy, softening bond yields, and balanced CAD point to positive economic indicators. Inflation remains within the target range, and the stability of the rupee further strengthens the outlook. This policy decision is expected to provide market stability and support the potential for continued economic growth.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*This article is for informational purposes only. This is not investment advice.
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