RBI Governor Shaktikanta Das said inflation is moving closer to the targets.
The Reserve Bank of India (RBI) on Friday kept its key lending rate unchanged at 6.5% for the seventh consecutive time. The decision was taken by a 5:1 majority at the bi-monthly Monetary Policy Committee (MPC) meeting, said RBI Governor Shaktikanta Das. An unchanged repo rate means the loan interest rates too are likely to remain unchanged.
The RBI had paused the rate increase cycle last April after six straight rate hikes of 250 basis points since May 2022.
'Inflation Closer To Targets'
Inflation is moving closer to targets, said the RBI Governor, projecting retail inflation for the current year at 4.5%. The RBI has been mandated by the government to maintain retail inflation at 4% with a 2% margin on either side.
Core inflation has declined steadily over the last nine months while fuel component remained in deflation for six straight months, Mr Das said. Robust growth prospects provide space for the policy to remain focussed on inflation, he added.
However, uncertainties in food prices continue to pose challenges, he said, adding that the MPC remains vigilant to the upside risk to inflation that may derail the path of disinflation. "Food inflation continues to exhibit considerable volatility which is impeding the ongoing disinflation process," he said.
'7% Growth Projected'
The RBI Governor said the country is projected to grow 7% this financial year, with 7.1% growth expected in the April-June quarter and 6.9% in the July-September quarter. "The risks are evenly balanced."
The Indian rupee has remained largely rangebound and is the most stable among the major currencies, said Mr Das. "Compared to the last three years, the rupee exhibited the lowest volatility in FY24. The relative stability of the rupee reflects sound macroeconomic fundamentals and external position," he added.
He also said that India's liquidity situation improved in March while the average borrowings under the marginal standing facility, which allows banks to borrow funds, moderated.
India continues to remain the largest receiver of remittances with the country's foreign portfolio investment seeing a significant turnaround, the RBI Governor said, adding that its forex reserves are now at a record high.
Mr Das also said that the global economy has remained resilient and global trade is expected to grow faster in 2024.