Policy To Stay “Disinflationary”, FY24 Growth Revised Up

The Reserve Bank of India outcome was as expected with a unanimous decision to keep the repo rate at 6.5%. Governor Das reiterated that the MPC remains focused on the “withdrawal of accommodation” and the vote was 5 to 6 on this stance. He continued to sound hawkish re inflation and was positive on growth with FY24 revised up and said that the central bank has to keep policy “disinflationary” and “stay the course on inflation”. There had been no need for OMO sales and the RBI will remain “nimble” in managing liquidity.

• FY24 growth was revised up 0.5pp to 7% as the net export drag moderates and domestic demand remains robust, especially capex, services and government spending. Household consumption is expected to pick up. GDP should moderate to 6.5% by Q2 FY25.
• While there has been a broad based easing in core price pressures, Das cited headline risks with it possibly rising in November/December. There is high uncertainty around food prices which will require close monitoring. The RBI remains “highly alert” and prepared to “take appropriate actions” if inflation is not moving in line with the 4% target.
• FY24 CPI forecast was unchanged at 5.4%
• It was noted that tighter monetary policy is still working its way through the economy.
• Uncertainties are high especially around the global growth outlook, due to geopolitical volatility.
• RBI was happy with INR stability and said it reflected the “economy’s resilience”.