RBI MPC meeting announcements: Gov Shaktikanta Das maintains FY24 real GDP growth at 6.5%, core inflation softened to 4.9%

Reserve Bank of India (RBI) Governor Shaktikanta Das in the October Monetary Policy Committee meeting on Friday stated that real GDP growth for FY 24 is maintained at 6.5 per cent. He said the GDP growth for July-September 2023 is unchanged at 6.5 per cent, October-December 2023 left unchanged at 6.0 per cent, and GDP growth forecast for January-March 2024 at 5.7 per cent. 

"Risks are evenly balanced, with real GDP growth at 6.5 per cent with Q2 at 6.5 per cent, Q3 at 6 per cent and Q4 at 5.7 per cent," RBI Governor Shaktikanta Das said during his address post the meet.

He added that the GDP growth forecast for April-June 2024 was pegged at 6.6 per cent. 

In the August meeting of the policy committee, the GDP forecast for FY24 was retained at 6.5 per cent as announced in June, which has been retained this time as well.

"Taking all these factors into consideration, real GDP growth for 2023-24 is projected at 6.5 per cent with Q1 at 8.0 per cent; Q2 at 6.5 per cent; Q3 at 6.0 per cent; and Q4 at 5.7 per cent, with risks broadly balanced. Real GDP growth for Q1:2024-25 is projected at 6.6 per cent," Governor Das had said at the previous meet.

Das said capex in the private sector is gaining ground. "Capacity utilisation has been going up on a seasonally adjusted basis. Investment activity maintained its momentum with good support from government. Services exports grew at a healthy pace driven by software and business services," he said.

He added that core inflation eased by around 140 basis points from its recent peak in January. RBI Governor Das said further reduction is key to price stability. "The future inflation trajectory will depend on many factors, although in the near term, it may come down," he said.

CPI headline inflation

RBI Governor Das on Friday expressed confidence that inflation will start to moderate from September onwards. Inflation print for August moderated to 6.83 per cent, after reaching a 15-month high of 7.44 per cent in July, breaching the upper limit of the RBI's tolerance range of 2-6 per cent.

The RBI observed that the CPI headline inflation surged  in July due to a spike in vegetable prices, before moderating somewhat in August to 6.8 per cent. Fuel inflation edged up to 4.3 per cent in August. Core inflation (i.e., CPI excluding food and fuel) softened to 4.9 per cent during July-August 2023. 

The near-term inflation outlook is expected to improve on the back of vegetable price correction and the recent reduction in LPG prices. The future trajectory will be conditioned by a number of factors like lower area sown under pulses, dip in reservoir levels, El Niño conditions and volatile global energy and food prices.

"The overall inflation outlook is clouded by uncertainties by a fall in kharif sowing, lower oil reserve levels and volatile global food and energy prices," the RBI governor said.

According to the Reserve Bank’s enterprise surveys, manufacturing firms expect higher input cost pressures but marginally lower growth in selling prices in Q3 compared to the previous quarter. Services and infrastructure firms expect a moderation in growth of input costs and selling prices.

On this basis, CPI inflation is projected at 5.4 per cent for 2023-24, with Q2 at 6.4 per cent, Q3 at 5.6 per cent and Q4 at 5.2 per cent, with risks evenly balanced. CPI inflation for Q1:2024-25 is projected at 5.2 per cent. 

"The near-term inflation outlook is expected to improve on the back of vegetable price correction and the recent reduction in LPG prices. The future trajectory will be conditioned by a number of factors like lower area sown under pulses, dip in reservoir levels, El Niño conditions and volatile global energy and food prices," Governor Das said on Friday.

RBI also maintained retail inflation at 5.4 per cent for 2023-24.

At the beginning of the announcements, Governor Das said: "The Indian economy is forging ahead in a challenging global environment, drawing strength from its underlying macroeconomic fundamentals and buffers. While growth remain on track, the declining trend in inflation was interrupted in July and August. Volatile food and energy prices in the wake of lingering geopolitical tensions and adverse weather conditions render uncertainty to the inflation outlook. We remain vigilant of the evolving inflation dynamics."

Also read: RBI MPC LIVE updates: RBI maintains status quo; retains FY24 GDP growth forecast to 6.5%; inflation outlook at 5.4%