RBI's MPC Meeting: Tackling Rising Inflation

Dec 05, 2024

Introduction:

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has commenced its three-day meeting to address the country's economic challenges, particularly rising inflation and lower-than-expected GDP growth. Chaired by RBI Governor Shaktikanta Das, the meeting will conclude on December 6, with the Governor announcing the policy decisions.

Economic Challenges

India's retail inflation surged to 6.21% in October, exceeding the RBI's upper tolerance limit of 6%. Food inflation reached 10.87%, with vegetable inflation soaring to 42.18%. Rural inflation stood at 6.68%, while urban inflation was comparatively lower at 5.62%. The economy grew by 5.4% in real terms during the July-September quarter of the 2024-25 financial year, significantly lower than the RBI's forecast of 7%.

MPC's Policy Options

The MPC may consider adjusting the policy repo rate, currently at 6.5%. However, economist Ashok Gulati suggests that the RBI may be slow to adjust its policies, citing the GDP growth figures for the second quarter. The MPC will also evaluate measures to address inflationary pressures and revive economic growth.

Key Areas of Focus

Inflation Control: The MPC aims to achieve the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%.
GDP Growth: The RBI projects real GDP growth for 2024-25 at 7.2%.
Monetary Policy Stance: The MPC will decide whether to maintain or adjust the policy repo rate.

Conclusion

The RBI's MPC meeting is crucial in addressing India's economic challenges. The policy decisions announced on December 6 will have significant implications for the country's inflation control and economic growth.