India holds rates amid buoyant growth

Security personnel at the entrance of the Reserve Bank of India headquarters in Mumbai. — AFP

NEW DELHI: India’s central bank raised its fiscal year growth forecast on the back of a robust economy and flagged continuing tight monetary policy while it keeps watch over inflation risks.

The Reserve Bank of India (RBI) expects the economy to expand 7% in the current fiscal year from 6.5% after stronger than expected growth in the July to September quarter.

“The Indian economy presents a picture of resilience and momentum,” RBI governor Shaktikanta Das said in a prepared statement.

“Growth remains resilient and robust, surprising everyone.”

At a press conference later in the day, RBI deputy governor Michael Patra called the upgraded gross domestic product estimate of 7% “conservative”.

The outlook for inflation, however, remains uncertain, the central bank officials said.

That prompted the central bank’s six-member monetary policy committee, consisting of three RBI and three external members, to keep the repo rate unchanged at 6.5%, for the fifth consecutive meeting, and in line with the unanimous consensus in a Reuters poll.

The vote on the repo rate decision was also unanimous.

The RBI had raised the repo rate by a total 250 basis points since May 2022 in efforts to cool surging inflation, which dropped to a four-month low of 4.87% in October, but is expected to remain above the RBI’s 4% medium-term target for some time.

The near-term outlook is “masked by risks to food inflation,” said Das, which might lead to an uptick in November and December even though core inflation, which excludes volatile food and fuel prices, has broadly moderated.

The central bank projected consumer inflation at 5.4% for 2023 and 2024, unchanged from its previous projection. — Reuters

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