RBI Repo Rate And GDP Growth Projection Forecast Unchanged In FY25

Reserve Bank Of India keeps the GDP real growth projection unchanged at 7.2%. The previous financial year has surpassed the expectations of the analysts with its unbelievable performance. The GDP growth rate was at 8.2% for the previous financial year. However, the forecast for the current financial year 2024-25 is at 7.2% from 7%. Thus, the first quarter target shifted to 7.3% from 7.1%. While the target for the upcoming quarters is the same. It includes Q2 FY25 at 7.2%, Q3 FY25 at 7.3%, and Q4 FY25 at 7.2%. The expectation for the upcoming financial year (2025-26) first quarter is 7.2% growth in GDP.

Why RBI Kept The GDP Growth Projection Unchanged?

Reserve Bank Of India kept the GDP growth projection unchanged at 7.2%. This happens because of several reasons including the unchanged repo rate. The Reserve Bank of India kept the repo rate at 6.5% for the ninth time in a row. While other rates that remained the same are as follows:

1. Repo Rate: 6.5%
2. Standing Deposit Facility (SDF): 6.25%
3. Marginal Standing Facility (MSF): 6.75%
4. Bank Rate: 6.75%

There was a meeting of three days where the majority of 4:2 goes for the repo rate to remain unchanged. Apart from the repo rate, the inflation forecast is also the same. Governor Shaltikanta Das mentions that the inflation rate forecast for Q2 FY25 is 4.4%, Q3 FY25 is 4.7%, and Q4 FY25 is 4.3%. While the projection for the upcoming financial year Q1 FY26 projects 4.4% growth.

Food inflation was a matter of concern for the people. However, food inflation is currently deflationary along with fuel. The sources show progress in controlling the core inflation also. It was the lowest in May and June. The major influence on food inflation comes from increasing vegetable prices. It was the cause of 35% of the inflation in June.

There can be several reasons behind the increasing vegetable prices. The major reason was excessive or no rainfall in the areas of the plantation. While areas like Punjab faced almost no rainfall affecting their crops. Areas like Assam, known for its tea plantation, faced floods and excessive rain damaging the tea plantation and increasing tea prices. The heatwave also extended for more days than expected. It leads to the death of several animals and plants.

These reasons contributed to the damage of a good amount of crops. While India may cover it at the time of cultivation of rabi crops. In conclusion, RBI has not made much change in the GDP growth forecast for FY25. While the repo rate and inflation forecast are also unchanged. The central bank feels to have a balanced risk at the moment leading to no major changes.