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Informist, Friday, Feb. 7, 2025

MUMBAI - Following are the highlights of the statement made by Reserve Bank of India Governor Sanjay Malhotra on Friday after the sixth bi-monthly meeting of the Monetary Policy Committee for 2024-25 (Apr-Mar):

 

KEY TAKEAWAYS

* MPC voted to cut repo rate by 25 bps to 6.25%
* MPC voted unanimously to cut repo rate by 25 bps to 6.25%
* SDF rate adjusted to 6.00%
* MSF and Bank rate adjusted to 6.50%
* MPC voted unanimously to maintain 'neutral' policy stance

* MPC kept neutral stance to deal with external volatility
* Neutral stance gives MPC flexibility to respond to evolving conditions

* MPC decisions to ensure fincl stability

* Growth, inflation dynamics open up space for MPC to cut rates

* MPC felt less restrictive monetary policy apt

* Minutes of Feb MPC meeting to be released on Feb 21

* Next MPC meeting on Apr 7-9

* Statement an opportunity to point out concerns, challenges

* To continue practice of Governor's statement post MPC meeting

INFLATION

* FY26 CPI inflation seen at 4.2%

* Retains FY25 CPI inflation forecast at 4.8%
* Cuts Jan-Mar CPI inflation forecast to 4.4% from 4.5?rlier

* Cuts Apr-Jun CPI inflation forecast to 4.5% from 4.6?rlier

* Retains Jul-Sept CPI inflation forecast at 4.0%

* Forecasts Oct-Dec 2025 CPI inflation at 3.8%
* Forecasts Jan-Mar 2026 CPI inflation at 4.2%

* MPC noted inflation has declined
* MPC noted inflation expected to further moderate FY26

* Food price pressures should see sequential softening
* Core inflation seen rising, but to remain moderate

* Flexible inflation targeting framework served India well

* Avg inflation lower since flexible inflation targeting adopted

* CPI has mostly stayed aligned with the target

* To use flexible inflation targeting to make best macro decision

* Strive to refine building of inflation targeting framework

* To develop more robust models to target inflation

* Progress of global disinflation is stalling
 

GROWTH

* FY26 GDP growth seen at 6.7%

* Cuts Apr-Jun GDP growth forecast to 6.7% from 6.9%
* Cuts Jul-Sept GDP growth forecast to 7.0% from 7.3%

* Sees Oct-Dec GDP growth at 6.5%
* Sees Jan-Mar FY26 GDP growth at 6.5%

* MPC noted growth is expected to recover from Jul-Sept
* MPC noted growth lower than FY24
* MPC noted global fincl mkt volatility pose risk to growth, CPI
* Global uncertainty pose downward risk to growth
* Risks evenly balanced
* Govt policy support augurs well for growth
* Svcs exports buoyancy to support growth
 

MACROECONOMY

* Indian econ strong and resilient, but not immune to global uncertainty
* To continue to improve macro outcomes in best interest of econ

* Emerging mkt nations seen large outflows, sharp depreciation
* Interest of econ demand fincl stability, consumer protection

* Econ interest warrants increasing efficiency in economy

* Global economic backdrop remains challenging

* High frequency indicators suggest resilience of global econ

* Uncertain global econ environ challenge for emerging economies

* Regulation to enhance consumer protection not devoid of cost
* To strike right balance between regulation and efficiency
* Will continue consultative process in regulation-making
* Suggestions from stakeholders are very valuable
* To ensure implementation of new regulations
* Implementation of norms to be done in a phased manner
* Will give sufficient time to stakeholders for transition
* Fincl activity expected to improve in FY26
* MPC to stay watchful in light of uncertain global environment
* Early corporate results suggest mild recovery in mfg sector
* Mfg activity expected to improve gradually in FY26
* Business expectation remains upbeat, svcs activity resilient
* Rural demand continues to be on uptrend
* Urban consumption remains subdued, data gives mixed signals
* Healthy agri activity bodes well for household consumption
* Improving employment conditions bode well for consumption
* Govt consumption expenditure to remain modest
* Budget tax cuts bode well for consumption
 

FINANCIAL MARKETS
* CAD for FY25 to remain well within sustainable level
* Jan. 31 FX reserves over $630 bln, over 10 mos' import cover
* Overall external sector is resilient
* Aim to ensure orderliness, stability in FX market
* Exchange rate policy remains consitent over the years
* Believe in mkt efficiency of Indian mkts
* Aim to smoothen excessive volatility in FX mkt
* We don't target a certain level for rupee's exchange rate
* Interventions in FX mkt focus on smoothening volatility
* FX policy consistent over the years, will continue

* Dollar has strengthened, bond yields have hardened

* Liquidity became deficit in Dec, Jan mostly due to advance tax payments

* World Bank estimates India remittance $129.1 bln 2024

* Will continue to strengthen, refine prudential frameworks

* Capital outflows, FX ops led to liquidity drain
* FX ops, currency in circulation weighed on liquidity Jan-Dec
* Some banks reluctant to on-lend funds, passively parking funds with us
* Committed to ensure adequate liquidity to fincl system
* Liquidity tight due to FX ops, currency in circulation rise
* To proactively take apt measures to ensure orderly liquidity conditions
* To ensure orderly liquidity conditions
* To take proactive steps on transitory, durable liquidity
* Bank liquidity buffers sufficient
* Some bks reluctant to work in uncollateralised call money mkt
* Banks' credit-deposit ratio at end Jan was 80.8%
* System level parameters for NBFCs are healthy
* Urge all banks to participate in fincl literacy campaign
* Surge in digital frauds a matter of concern
* Rapid digitalisation has increased exposure to cyber threats
* Taking various steps to control surge in cyber frauds
* To introduce 'bank.in' exclusive domain name
* Bks to register for exclusive bank.in domain from April
* To extend two-factor authentication to intl online payments
* To introduce fin.in domain for broader fincl system entities
* Urge banks, NBFCs to improve cyber threat mitigating steps
* To introduce fwd contracts in govt securities
* Bond fwds to help long-term investor manage interest rate risk
* SEBI-registered brokers can participate on NDS-OM platform

* Brokers access to NDS-OM platform to up retail access to gilts

* To form working group to review mkt trading, settlement times
* Working group on mkt timings to submit report by Apr 30

 

End

 

Compiled by Vinod Bhovad

Filed by Vandana Hingorani
 

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