India Monetary Policy April 2024

India: RBI stands pat for seventh consecutive meeting in April

On 5 April, the Reserve Bank of India (RBI) left the policy repo rate unchanged at 6.50% for the seventh meeting running, as expected by the market. It also left its standing deposit facility and marginal standing facility rates unchanged at 6.25% and 6.75%, respectively. Five board members voted for the decision, while one voted for a 25 basis point cut.

In explaining its decision, the RBI noted that food price pressures—fueled by adverse weather—are “interrupting” the return of inflation to its medium-term inflation target of 4.0%. The RBI also pointed to the upside risks to the inflation outlook posed by geopolitical tensions in justifying its move due to their potential impact on trade and commodity prices.

The RBI said that it expects inflation to average 4.5% and GDP growth to average 7.0% in the fiscal year starting in April, unchanged from the projections at its last meeting in February.

The RBI said it would keep its policy stance focused on the “withdrawal of accommodation”, maintaining a hawkish tone.

The Consensus is for the RBI to begin lowering the policy repo rate in July–September this year.

The RBI’s next meeting is due on 5–7 June.

Analysts at Nomura said:

“We expect the first cut in August […]. Inflation is already aligning closer to the 4% target; core has undershot 4%; repeated supply shocks have not resulted in any generalization […]. We expect 100bp in cumulative cuts in FY25.”

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