India Central Bank Keeps Rate Unchanged After Election Raises Fiscal Policy Uncertainty

By Kosaku Narioka

India's central bank held its policy rate steady as Prime Minister Narendra Modi's election setback raised uncertainty over the country's future economic and fiscal policies.

Reserve Bank of India Gov. Shaktikanta Das said Friday that the monetary-policy committee decided to maintain its policy repo rate at 6.50%.

The committee decided to remain focused on withdrawal of accommodation, he said.

All 11 economists surveyed by The Wall Street Journal had expected the central bank to stand pat on its policy rate.

Modi's party failed to secure an outright majority in the lower house of Parliament following the general election. That has increased uncertainty over the country's fiscal policies, as India's prime minister will now need the help of coalition partners to push through his economic agenda.

India's economy grew 8.2% in the year ended March, fueled by government spending on infrastructure and improvement in manufacturing and construction.

The consumer-price index in April rose 4.8% from a year earlier, compared with the central bank's inflation target of 4.0% with a tolerance band of 2% above and below that level.

RBI raised the policy rate by a total of 2.5 percentage points from May 2022 to February 2023 in response to a surge in inflation caused by the Russia-Ukraine war and the recovery from the Covid-19 pandemic. It has since kept the policy rate unchanged.

Write to Kosaku Narioka at [e-mail]

(END) Dow Jones Newswires

06-07-24 0059ET