RBI MPC notes inflation is currently below the target: Here are 10 points from RBI April minutes

The Reserve Bank of India (RBI) on Wednesday, April 23, released its minutes for the month.

The central bank slashed its key policy repo rate by 25 basis points to 6.00% in April, adopting an accommodative stance for the first time since the pandemic era, as it seeks to boost economic growth amid a faltering global outlook and easing inflation pressures at home.

The decision comes against a backdrop of heightened global economic uncertainty, exacerbated by recent trade tariff measures that have unsettled markets and clouded growth prospects worldwide.

1. The global economic outlook is fast changing. The recent trade tariff-related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation.

2. The National Statistics Office (NSO) has estimated real Gross Domestic Product (GDP) growth at 6.5% for 2024-25, on top of 9.2% in 2023-24. Going forward, sustained demand from the rural areas, an anticipated revival in urban consumption, expected recovery of fixed capital formation supported by increased government capital expenditure, higher capacity utilisation, and healthy balance sheets of corporates and banks are expected to support growth.

3. Merchandise exports would be weighed down by the evolving global economic landscape, which appears to be uncertain at the current juncture, while services exports are expected to sustain the resilience. On the supply side, while agricultural prospects appear bright, industrial activity continues to recover, and the services sector is expected to be resilient.

4. Headwinds from global trade disruptions continue to pose downward risks. Taking all these factors into consideration, real GDP growth for 2025-26 is now projected at 6.5%, with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%.

5. The outlook for food inflation has turned decisively positive. There has been a substantial and broad-based seasonal correction in vegetable prices. The uncertainties on rabi crops have abated considerably, and the second advance estimates point to a record wheat production and higher production of key pulses over last year. Along with robust kharif arrivals, this is expected to set the stage for a durable softening in food inflation.

6. A sharp decline in inflation expectations for the three-month and one-year ahead periods would help anchor inflation expectations going ahead. Furthermore, the fall in crude oil prices augurs well for the inflation outlook. Concerns about lingering global market uncertainties and the recurrence of adverse weather-related supply disruptions pose upside risks to the inflation trajectory.

7. Taking all these factors into consideration, and assuming a normal monsoon, CPI inflation for the financial year 2025-26 is projected at 4%, with Q1 at 3.6%, Q2 at 3.9%, Q3 at 3.8%, and Q4 at 4.4%.

8. The MPC noted that inflation is currently below the target, supported by a sharp fall in food inflation. Moreover, there is a decisive improvement in the inflation outlook. As per projections, there is now a greater confidence of a durable alignment of headline inflation with the target of 4% over a 12-month horizon.

9. While the risks are evenly balanced around the baseline projections of growth, uncertainties remain high in the wake of the recent spurt in global volatility. In such challenging global economic conditions, the benign inflation and moderate growth outlook demand that the MPC continue to support growth.

10. On the demand side, rural demand is likely to remain healthy, riding on the good prospects of the agriculture sector's growth. Investment activity is expected to improve further due to improvements in capacity utilisation, demand revival, and healthy balance sheets of banks and corporations.

RBI Governor Sanjay Malhotra said, “The global economic landscape remains in a state of flux amidst heightened trade and policy uncertainties, with attendant implications for economies across the world, posing complex challenges and trade-offs in policy making. The channels through which these global shocks could impact economies, particularly emerging market economies, include spillovers from global growth slowdown, elevated financial markets volatility and dented consumer and investor confidence. The Indian economy remains relatively less exposed and better placed to withstand such spillovers, with its growth driven largely by domestic demand.”

“Going forward too, considering the evolving growth-inflation trajectories, monetary policy needs to be accommodative,” Malhotra further said.