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India’s central bank will stick to its economic growth projection of 7.2% for the fiscal year despite last quarter’s slowdown, and officials will continue to maintain their focus on price stability, Governor Shaktikanta Das said.
The Reserve Bank of India’s growth estimate for the year through March 2025 is “not out of place” even though figures last week showed the economy grew at a slower pace than predicted, Das said at a banking event in Mumbai on Thursday.
While there’s some optimism the food inflation outlook is improving, the RBI must keep its focus on the “last mile of disinflation,” the governor said. That suggests the central bank is in no hurry to cut interest rates just yet after keeping its benchmark repurchase rate unchanged for more than 18 months already.
“The best contribution that monetary policy can make for sustainable growth is to maintain price stability,” Das said.
Economists predict the RBI may begin easing from the final quarter of 2024 once the Federal Reserve has started cutting rates.
The governor pointed to several factors that underpin his optimism about the growth outlook. Private consumption and investment has recovered, he said, while data showed a rebound in rural spending. Bank credit to agricultural and manufacturing businesses have improved, including to small and medium-sized firms, he said.
“Fundamental growth drivers of the Indian economy are actually gaining momentum,” Das said. “They are not slowing. This gives us the confidence to say that Indian growth story remains intact.”
The governor added that he expects new monetary policy committee members to be “appointed on time” so that the October meeting can take place as scheduled.
The current terms of the three external people on the six-member MPC will end on Oct. 4. The next scheduled rate decision is on Oct. 9.
(Updates with additional comments)
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