New Delhi, October 09, 2024

Taking various factors into consideration the MPC has projected real GDP growth for 2024-25 to 7.2%. This number remains unchanged from the last projection. Also, taking various factors into consideration, the CPI inflation for 2024-25 has been projected at 4.5%, the same as projected in the previous policy.

Governor Shaktikanta Das announced the central bank’s decision on policy rates in the RBI’s concluding day  MPC meeting on Wednesday. “The Flexible monitory policy framework has completed 8 years. This is major structural reform, “ Mr. Das said in a statement.

The RBI announced a balanced monetary policy, opting to keep interest rates unchanged while shifting its stance to neutral. The overall tone remained positive from the market’s perspective. While there was no explicit mention of a rate cut, subtle cues in the governor’s speech hint at the possibility of a rate reduction in upcoming policies, said Santosh Meena, Head of Research at Swastika Investmart.

“RBI Governor “walks the talk” on managing inflation as their key priority, yet again! Hence, the policy rate was kept unchanged, although the stance was changed to Neutral. His oft repeated statement was, “unambiguously focused on durable alignment of inflation with target, while supporting growth”; signaling clearly that any future rate cut would depend upon the inflation trajectory trending downwards. The Governor’s comfort for the change in stance seemingly stemmed from India’s growth story remaining intact; with private investment & consumption as well as Govt capex expected to pick up in H2, a stronger kharif output & rabi sowing due to a good monsoon lending to a pick-up in rural demand, and a resilient CAD & forex position keeping the INR steady. Hence, he retained the current year GDP growth target at 7.2%, while mentioning that adverse weather conditions and/or accentuated geopolitical conflicts could lead to downside risks for the economy.” Says Manish Kothari, Head – Commercial Banking, Kotak Mahindra Bank Limited.

 Over the last couple of weeks, the 10-year benchmark G-sec yields have risen by around 10 basis points due to these factors. However, if these global challenges prove temporary, we might see a rate cut in the next policy cycle. In this context, long-term bonds with current yields look attractive, and investors may want to consider locking them in, especially if global tensions ease and domestic economic indicators remain stable, said Suresh Darak, Founder of Bondbazaar.