RBI inflation fixation persists

Key rates unchanged at 6.5% but reduction in CRR will result in liquidity infusion of Rs 1.16 lakh crore

As Shaktikanta Das nears the end of his tenure as Reserve Bank of India (RBI) Governor, he has once again showcased his unwavering commitment to a key goal: controlling inflation.

India's economy has been slowing, with GDP growth falling to 5.4% in the July-September quarter—the lowest in seven quarters. At the same time, inflation hit a 14-month high of 6.21% in October, driven mainly by rising food prices. The RBI has responded by revising its inflation forecast for the current financial year (April 2024 to March 2025) from 4.5% to 4.8%.

Governor Das noted that food inflation, a significant contributor to rising prices, is expected to ease in the coming months. "As food price shocks wane, headline inflation is likely to ease and realign with the target," he said.

The RBI has also decided to keep the key interest rate at 6.5%—marking the 11th consecutive meeting with no change. This steadfast approach highlights the RBI's focus on stabilizing the economy amidst an uncertain climate. Again, the decision comes at a difficult time. Growth is slowing, inflation is above 6%, and the rupee is weakening. This mix of challenges has forced policymakers to tread carefully.