RBI MPC Meet: 'Neutral' Stance Gives Flexibility; Rate Cut Timing Not Appropriate, Says Das

The Reserve Bank of India's MPC framework has worked very well amidst multiple shocks India has witnessed, Governor Das said in the media briefing, acknowledging the 51st meeting of the MPC.

The central bank does not see any evidence of higher interest rates impinging on growth, Das said. "Growth continues to remain robust, with investment intentions looking strong."

Growth has been holding steady despite rates remaining unchanged for a year and a half, he said.

Market participants must not overlook so many positives on the overall economy, because of one data point point, Das said referring to the fall in the last PMI.

"At any given point, there will be pushes and pulls in economic activity," the RBI Governor said. PMI numbers of India are probably the highest in the world, he said.

The manufacturing PMI in September eased to the lowest since January 2024, while the services PMI fell to the lowest since November 2023.

Michael Debabrata Patra, Deputy Governor said that India's own growth and inflation dynamics are quite robust. "Have been developing buffers to deal with spillovers from the rest of the world."

The Reserve Bank of India has "great confidence" that inflation is moderating, but significant risks remain, the RBI Governor said told reporters. "The fact that growth and inflation are well poised means that monetary policy framework is working."

The central bank has achieved what it wanted to achieve through a 'withdrawal of accommodation' stance, Das said. The governor added that its "not appropriate to talk about timing of a rate cut."

First-quarter growth was lower primarily because of lower spending by state, and central governments, the RBI Governor told reporters after the policy briefing on Wednesday.

The RBI is getting a sense that the state and central governments will meet their budgetary targets on spending, Das said. "The first quarter subsidy payout was high by state and central government."

If the effects of subsidies are removed, the GDP growth would have been much above 7% in the first quarter, Das said. "We don't go by statistical factors when judging economic growth..Look for action on the growth to determine economic growth projections."

Consumption and investments—drivers of growth—continue to remain stable, RBI Governor Shaktikanta Das told reporters after the policy briefing on Wednesday.

Private investments are showing signs of pick-up, Das said. "Going by all signs, private capex and government expenditure is doing well," he said adding that the services sector is continuing to do well.

Agriculture is going to provide a big boost this time as the monsoon has been very good, Das said. Urban demand has been steady, and will get support from buoyant services sector, he said.