The Reserve Bank of India (RBI), under the leadership of Shaktikanta Das, has maintained a steady course in its monetary policy approach. In the recent policy meeting, the Monetary Policy Committee (MPC) unanimously chose to keep the repo rate unchanged at 6.50%, marking the third consecutive meeting with no rate adjustments. The RBI Governor emphasized the continuation of the ‘accommodative’ stance on interest rates.
RBI Governor Shaktikanta Das highlighted key points from the policy meeting:
- Repo Rate Unchanged: The MPC decided to maintain the repo rate at 6.50% to promote sustained micro and macroeconomic growth in India.
- Global and Indian Economic Status: Das emphasized India’s position as the 5th largest economy globally, contributing around 15% to global growth. Despite challenges in the global economy, India has managed to control inflation. Indian banks maintain substantial cash reserves, indicating potential for a smooth credit line for various infrastructure projects.
- GDP Growth Projection: The RBI predicts a GDP growth of 6.5% for the financial year 2023-24 (FY24).
- Inflation and CPI Forecast: Inflation for Q1FY24 was reported at 6.4%, aligning with RBI expectations. The governor anticipates a correction in vegetable prices over the next few months. The overall inflation projection for FY24 stands at 6.5%, with consumer price index (CPI) projected at 5.4% for the year, compared to 5.1% in FY23.
Market experts shared their insights:
- Pratapsingh Nathani, Chairman and MD at Beacon Trusteeship, noted the RBI’s cautious approach due to potential inflationary pressures from agricultural prices. Nathani highlighted the decline in CPI inflation by 100 basis points from January 2023, suggesting that although a spike in agricultural inflation might occur, it’s expected to correct within the next few months. He mentioned that while the Indian economy is robust, the RBI will continue to use available instruments to manage ongoing inflation.
- The MPC’s first bi-monthly policy announcement for FY24 was made on April 6. Despite expectations of a 25 basis points rate hike to 6.75%, the RBI MPC chose to keep the repo rate unchanged at 6.50%. This stance was reiterated in the June 2023 MPC meeting.
In summary, the RBI’s monetary policy remains unchanged, with the repo rate maintained at 6.50%. The RBI Governor highlighted India’s economic position, predicted GDP growth, and provided insights into inflation and CPI projections for FY24. The policy reflects a cautious approach considering global economic influences and domestic factors.
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