The Reserve Bank of India (RBI) decided to maintain the repo rate at 5.25% during its latest Monetary Policy Committee (MPC) meeting. The Standing Deposit Facility (SDF) rate remains at 5%, while the Marginal Standing Facility (MSF) rate stays at 5.50%, as stated by RBI Governor Sanjay Malhotra. Looking ahead, the Governor acknowledged the challenges of 2025 but mentioned a decrease in inflation since the October policy.
High-frequency indicators up to February suggest a sustained strength in economic activity, according to Malhotra. The growth momentum is being fueled by robust private consumption and steady investment demand. Malhotra emphasized the positive impact of GST rationalization and the buoyant services sector on urban consumption, which is expected to strengthen further.
Despite the positive outlook, the MPC expressed concerns about global uncertainties. The Governor highlighted the risks posed by conflicts impacting energy and infrastructure, which could affect both inflation and growth prospects. Additionally, Malhotra cautioned about the potential macroeconomic pressures from elevated crude oil prices, which might lead to increased imported inflation and a wider current account deficit.
The Governor also pointed out the possibility of weaker global growth affecting external demand and remittance flows. Under the revised GDP series, the real GDP growth for the previous year is reported at 7.6%. Malhotra warned about the impact of potential disruptions in the Strait of Hormuz on the current year’s growth. However, he acknowledged the government’s proactive measures to ensure the availability of essential inputs across critical sectors, helping to mitigate supply chain disruptions and maintain optimistic business sentiment.
