Synopsis
On February 21, RBI Governor Sanjay Malhotra highlighted the crucial need for stronger policy frameworks and macro fundamentals to ensure resilience and macroeconomic stability. He emphasized the importance of maintaining growth momentum while managing inflation effectively.Key Takeaways
- Stronger policy frameworks are essential for economic stability.
- Maintaining high growth momentum is crucial.
- Food inflation is likely to ease significantly.
- Disinflation of headline CPI is projected.
- GDP growth estimates indicate a recovery in the future.
New Delhi, Feb 21 (NationPress) Stronger policy frameworks and robust macro fundamentals are essential for resilience and ensuring overall macroeconomic stability, stated RBI Governor Sanjay Malhotra.
During the recent Monetary Policy Committee (MPC) meeting, the minutes of which were published by the central bank on Friday, Malhotra emphasized the importance of preserving the high growth momentum while also maintaining price stability. This requires the monetary policy to employ various instruments to achieve a balance between inflation and growth.
After exceeding the upper limit of the tolerance band in October, headline inflation has shown a moderation in November and December.
Looking ahead, Malhotra noted that food inflation pressures are expected to ease significantly due to the strong kharif harvest, seasonal adjustments in vegetable prices, and a promising rabi crop outlook.
The outlook for food inflation is becoming increasingly positive. Additionally, budget proposals related to agriculture and a commitment to fiscal consolidation are beneficial for maintaining price stability and will help stabilize inflation expectations over the medium term, he said.
These measures are projected to enhance the disinflation of headline CPI and align it with the target rate by FY 2025-26. CPI inflation for Q4 is anticipated at 4.2 percent, with the same projection for the financial year 2025-26, emphasized the RBI Governor.
The Reserve Bank estimates the real GDP growth for the current year at 6.4 percent, which is a slight slowdown compared to last year's robust growth of 8.2 percent.
Although GDP growth is expected to recover in the latter half of 2024-25 and into 2025-26, current forecasts for 2025-26 suggest growth rates ranging from 6.3 to 6.8 percent.
This growth is expected to be bolstered by promising rabi prospects and a projected recovery in industrial activity. On the demand side, both consumption and investment are anticipated to show improvement, Malhotra added.
The MPC evaluated surveys conducted by the Reserve Bank to assess consumer confidence, households’ inflation expectations, corporate sector performance, credit conditions, and the outlook for the industrial, services, and infrastructure sectors along with projections from professional forecasters.
Furthermore, the MPC meticulously reviewed the staff’s macroeconomic projections and various risks to the outlook.
