New Delhi: The Reserve Bank of India announced on Friday that it is increasing the Contingent Reserve Buffer from 6 per cent to 6.5 per cent. Governor Das shared the results on the Monetary Policy Committee meeting which started on Wednesday in the immediate aftermath of the Lok Sabha election results.
Governor Shaktikanta Das announced in the press conference today that the Consumer Price Index (CPI) inflation for the financial year 2024-25 is projected at 4.5 per cent. This projection reflects the RBI’s commitment to maintaining price stability while supporting sustainable economic growth. (Also Read: RBI Sticks To 6.5% Key Lending Rate For 8th Consecutive Time, Fighting Inflation Remains Focus)
Governor Das address referenced the provisional estimates released by the National Statistical Office (NSO), which placed India’s real gross domestic product (GDP) growth at an impressive 8.2 per cent for the fiscal year 2023-24. (Also Read: RBI Governor Shaktikanta Das To Announce Monetary Policy Amid Rising Inflation Concerns)
He emphasised that during the ongoing fiscal year 2024-25, domestic economic activity has exhibited resilience, with manufacturing activity witnessing robust growth propelled by strengthening domestic demand.
Governor Das said that India accounts for 15.2 per cent of the world’s remittances, highlighting the significant contribution of overseas Indian workers to the country’s economy. This substantial influx of remittances underscores India’s strong ties with its diaspora and its ability to leverage human capital for economic development.
Moreover, Foreign Direct Investment (FDI) inflows into India reached an impressive USD 41.6 billion, reflecting investor confidence in the country’s business environment and growth prospects. The gross Non-Performing Assets (NPAs) of all scheduled commercial banks and Non-Banking Financial Companies (NBFCs) remained below 3 per cent.
India’s foreign exchange reserves have soared to a historic high of USD 651.5 billion as of May 31, underlining the country’s strong position in terms of liquidity and external stability. Das emphasised, “India’s Foreign exchange reserve reached a historical high of USD 651.5 billion as on May 31.”
Furthermore, India’s external sector remains resilient, with key vulnerability indicators showing continuous improvement. This resilience is a testament to the country’s ability to navigate global economic challenges and underscores its position as a key player in the international arena. Highlighting key indicators of economic performance, Governor Das noted the healthy growth recorded by the eight core industries in April 2024.
Additionally, he underscored the strength exhibited by the Purchasing Managers Index (PMI) in the manufacturing sector, which soared to its highest level globally in May 2024. Furthermore, the services sector maintained its buoyancy, evident from the robust expansion indicated by a PMI services reading of 60.2 in May 2024. Governor Das reiterated the RBI’s commitment to maintaining a balanced growth-inflation trajectory, stating, “
The inflation growth balance is moving favourably. Growth is holding firm. Inflation continues to moderate, mainly driven by the core component, which reached its lowest level in the current series In April 2024. The deflation in fuel prices is ongoing. Food inflation, however, remains elevated. While the MPC took note of the disinflation achieved so far without hurting growth, it remains vigilant to any upside risks to inflation, particularly from food inflation, which could possibly derail the path of disinflation.
He added, “Hence, monetary policy must continue to remain disinflationary and be resolute in its commitment to aligning inflation to the target of 4 per cent on a durable basis. Sustained price stability would set strong foundations for a period of high growth.”
He acknowledged the ongoing deflation in fuel prices but highlighted that food inflation remains elevated. While acknowledging the achievements in disinflation without compromising growth, Governor Das stressed the importance of vigilance against potential upside risks to inflation, particularly stemming from food prices.
He emphasized that monetary policy must remain disinflationary and resolute in aligning inflation with the target of 4 per cent on a durable basis. Sustained price stability, according to Governor Das, lays the groundwork for a period of robust economic growth. (With ANI Inputs)