The change in the MPC was primarily driven by the 5.4% GDP print in Q2, which led RBI to slash its own projection by 60 bps to 6.6% in the December policy. On the back of better supplies, food prices declined to 8% in January, taking the headline inflation reading to a low 4.8%, down from 5.2% in the previous month.
There has been a shift in the domestic growth-inflation balance since the December policy: while the inflation registered sequential softening, growth outcomes were weaker. Heightening uncertainties, emanating from the global financial markets and trade policies, too, cloud the outlook for domestic growth and inflation, said RBI deputy governor M Rajeshwar Rao, who is incharge of the monetary policy department at the central bank, in his responses at the meeting.
On February 7, the RBI announced a 25 bps rate cut for the first time since the May 2020 unconventional reduction of 50 bps to 4% in the peak of the pandemic.