RBI Annual Report 2023-24: MPC resolute in pursuit of price stability, food inflation vulnerable to supply shocks

It its annual report for 2023-24, the Reserve Bank of Indi (RNI) highlighted that macroeconomic fundamentals remain strong, with headline inflation expected to moderate further.

However, the central bank flagged risks to food inflation saying that it remains vulnerable to supply-side shocks. The MPC will remain resolute in its pursuit of price stability, the annual report said. 

While proactive supply-side interventions by the government are critical to keep food price pressures under check, monetary policy will remain resolute in its pursuit of price stability so that inflation is aligned with its target of 4 percent on a durable basis and inflation expectations are anchored.

“Consumption demand, especially in rural areas, to spur as headline inflation eases towards targeted level. Indian economy is well-placed to step up growth trajectory over next decade in the environment of macroeconomic and financial stability,” the central bank said in its report. 

External sector’s strength, forex reserves buffer will insulate domestic economic activity from global spillovers. Indian economy would have to navigate challenges posed by the rapid adoption of AI/ML technologies, and recurrent climate shocks, the report added. 

Geopolitical tensions, global commodity price movements, and erratic weather developments pose downside risks to growth outlook, it said. 

The central bank expects robust GDP growth on the back of solid investment demand, which is supported by healthy balance sheets of banks and corporates. 

MSPs for both Kharif and Rabi seasons 2023-24 ensured a minimum return of 50 percent over the cost of production for all crops, it added. 

RBI feels that outlook for the Indian economy remains bright, underpinned by a sustained strengthening of macroeconomic fundamentals.  

The central bank is forecasting a real GDP growth of around 7 percent for FY25. 

“The government’s continued thrust on capex while pursuing fiscal consolidation, and consumer and business optimism augur well for investment and consumption demand,” it said in its report. 

The Reserve Bank will undertake liquidity management operations in sync with the monetary policy stance while meeting the needs of the productive sectors of the economy.