RBI keeps policy rate unchanged amid election fallout

The Reserve Bank of India (RBI) opted to maintain its policy rate at 6.50% amidst uncertainties stemming from Prime Minister Narendra Modi’s election setback. Following the general election, where Modi’s party fell short of an outright majority in the lower house of Parliament, questions loom over the nation’s future economic and fiscal policies.

RBI Governor Shaktikanta Das announced the decision on Friday, stating that the monetary-policy committee remains focused on withdrawing accommodation. This decision aligns with the expectations of all 11 economists surveyed by The Wall Street Journal, who anticipated the central bank to keep its policy rate unchanged.


India’s economy witnessed robust growth of 8.2% in the fiscal year ending March, fueled by government expenditure on infrastructure and improvements in manufacturing and construction sectors. However, concerns arise as the consumer-price index in April recorded a 4.8% increase from a year earlier, slightly surpassing the central bank’s inflation target of 4.0% with a tolerance band of 2% above and below.

RBI’s previous response to inflationary pressures, including a total increase of 2.5 percentage points in the policy rate from May 2022 to February 2023, was prompted by the Russia-Ukraine conflict and the economic rebound from the Covid-19 pandemic. Since then, the central bank has maintained a steady policy rate.