Mumbai (Maharashtra) [India]: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has reiterated that durable price stability is essential for establishing strong foundations for sustained economic growth. The statement was made during the committee’s three-day policy meeting held earlier in December.
“The MPC emphasizes that strong foundations for high growth can be secured only with durable price stability,” read the minutes of the meeting, which were released on Friday.
The MPC also affirmed its commitment to achieving a balance between inflation and growth to benefit the overall economy. In line with this objective, the committee decided to maintain the policy repo rate at 6.50 percent for the eleventh consecutive time.
Additionally, the MPC opted to continue its neutral stance on monetary policy. “This approach provides flexibility to monitor progress on disinflation and growth while allowing appropriate action as needed,” the minutes stated.
Focus on Inflation Risks
The MPC acknowledged that near-term inflation and growth dynamics in India have worsened since the October policy review. The committee highlighted a recent spike in inflation, which underscores the persistent risks posed by overlapping shocks to inflation expectations.
Geopolitical uncertainties and financial market volatility were cited as additional factors contributing to upward risks for inflation. The MPC cautioned that high inflation reduces the purchasing power of rural and urban consumers alike, potentially hampering private consumption.
Retail inflation remains a critical concern, with policymakers aiming to bring it down to a sustainable target of 4 percent. India’s retail inflation stood at 5.48 percent in November, a decline from 6.21 percent in October.
Outlook on Economic Activity
Despite the challenges, the MPC expressed optimism about the future. The central bank anticipates improved economic activity, supported by rising business and consumer sentiment. The MPC reaffirmed its focus on ensuring a durable alignment of inflation with targets while supporting growth initiatives.