Mumbai, Feb 22: Stronger policy frameworks and robust macro fundamentals remain the key to resilience and fostering overall macroeconomic stability, according to RBI Governor Sanjay Malhotra.In the Monetary Policy Committee (MPC) meeting held earlier this month, the minutes of which were released by the central bank on Friday, Malhotra said that domestically too, there is a need to preserve the high growth momentum, while maintaining price stability, necessitating monetary policy to use various policy instruments to maintain the inflation-growth balance.
Headline inflation, after moving above the upper tolerance band in October, has moderated in November and December.
“Going forward, food inflation pressures are likely to see significant easing on robust kharif harvest arrivals, winter season correction of vegetable prices and a promising rabi crop outlook,” said Malhotra.
The food inflation outlook is turning decisively positive. Moreover, the budget proposals on agriculture and the commitment to fiscal consolidation, among others, are positive for price stability and would help to anchor inflation expectations over the medium term, he said.
“These would provide greater impetus to disinflation of headline CPI and its eventual alignment with the target rate in FY 2025-26. CPI inflation for Q4 is projected at 4.2 per cent and that for the financial year 2025-26 at 4.2 per cent,” the RBI Governor emphasised.
According to the Reserve Bank, the real GDP growth for the current year is estimated at 6.4 per cent, a softer expansion after a robust 8.2 per cent growth last year.
Even though the GDP growth is expected to recover in the second half of 2024-25 and 2025-26 from 6.0 per cent recorded in the first half of 2024-25, the growth rate projected by various forecasts for 2025-26 varies from 6.3 to 6.8 per cent.
“This will be supported by healthy rabi prospects and an expected recovery in industrial activity. From the demand side, consumption and investment are also expected to improve,” Malhotra added.
The MPC reviewed the surveys conducted by the Reserve Bank to gauge consumer confidence, householdsâ inflation expectations, corporate sector performance, credit conditions, the outlook for the industrial, services and infrastructure sectors, and the projections of professional forecasters.
The MPC also reviewed in detail the staffâs macroeconomic projections, and alternative scenarios around various risks to the outlook.