The Monetary Policy Committee MPC on Wednesday maintained its projections for the rate of price rise at 6.7 per cent for the current financial year after writing to the government over its failure to contain the retail price up to six per cent for three consecutive quarters. It raised it slightly by 10 basis points bps for the third and fourth quarters.
The second quarter saw a bit less rate at 7.04 per cent than the 7.04 per cent expected by MPC in its September review.
MPC expected Q 3 to be 6.6 per cent and Q 4 at 5.9 per cent.
The panel projected that the rate would come below that in the next two months with October inflation already at 6.8 per cent. It may stay over the Reserve Bank of India's mandate of six per cent for each of the two months: November and December.
The panel slashed its projections for the economic growth rate by 20 basis points to 6.8 per cent for the current financial year, even though the second quarter yielded it at 6.3 per cent, the same as predicted by the panel.
Economic growth projections for the third and fourth quarters were slashed by 20 bps and 40 bps to 4.4 per cent and 4.2 per cent respectively.
The MPC projected that the economy would grow 13.5 per cent in the first quarter of the current financial year, forcing the panel to reduce its projections for full year growth to 7 per cent from earlier 7.2 per cent in its September review.
The panel said that the economy faces a lot of headwinds from protracted geopolitical tensions, tightening global financial conditions and slowing external demand.
The agricultural outlook has brightened with the prospects of a good rabi harvest, it said, adding the sustained rebound in contact-intensive sectors is supporting urban consumption.
It said that investment activity should be boosted by robust and broad-based credit growth and the government's thrust on capital spending and infrastructure.