Volatile food prices to keep monetary policy makers on alert
Reserve Bank of India is likely to hold repo rates steady for a long period as easing of core inflation and high real interest rate provide comfort, but the frequent blow to food product prices though transient, may force monetary policy makers to be on alert, according to the minutes of the monetary policy committee (MPC) meeting.
But he cautioned about uncertainties, especially from adverse weather events, the playout of El Nino conditions, uncertainties in global food and energy prices and volatility in global financial markets.
«Monetary policy has to remain extra alert and ready to act, if the situation warrants.
The hard earned macroeconomic stability has to be preserved,» he said.
Retail inflation, measured by Consumer Price Index, was seen at 5% for September, easing from 6.8% in August. The print was within the upper tolerance level of 6% much to the comfort of policymakers.
The underlying thought process at the MPC meeting, held between October 4 and 6, was to keep the policy measures sufficiently disinflationary without being overly restraining to make the economic growth a durable one.
«There are signs of a revival in investment now after more than a decade. Sharp financial tightening in 2011 and 2017 punctured such past revivals and led to persistent slowdowns,» external MPC member Ashima Goyal said.
«So it is important to ensure a sustained and sustainable revival this time. There is no excess lending or an infrastructure boom this time, but a healthy gradual rise,» she added.
RBI projected GDP to grow at 6.5% for FY24, with the second quarter growth at 6.5%, third quarter at 6% and fourth quarter at 5.7%.
«The changes in the outlooks for both inflation and growth are quite modest, and
the real repo
