Journalism of Courage
RBI Governor Shaktikanta Das on Thursday announced the monetary policy statement of the central bank. The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) kept the repo rate, its key lending rate, unchanged at 6.50 per cent, and maintained its stance on “withdrawal of accommodation.”
Here are the key takeaways from the first bi-monthly monetary policy of 2023-24 announced today:
Repo rate
RBI governor Das said that the MPC has unanimously decided to keep the repo rate unchanged at 6.50 per cent. Das said while emphasising that the decision to pause the repo rate is for this meeting only. He added that the committee would not hesitate to take further action as may be required in its future meetings.
The repo rate is the rate through which the RBI lends money to commercial banks. The RBI’s MPC has raised the repo rate by 250 bps in the last 11 months, since May 2022.
GDP forecast
The RBI’s MPC marginally revised the GDP growth projection upwards to 6.50 per cent for the current financial year of FY2023-24, from its earlier estimate of 6.4 per cent.
Das said that GDP growth in the first quarter of FY24 is expected at 7.8 per cent, followed by 6.2 per cent for second quarter, 6.1 per cent for third and 5.9 per cent for the fourth quarter.
Banking crisis
Talking about the recent upheaval in the banking sector, Das said that the RBI keeping close watch on turmoil in banking sector in developed countries.
He said, “While the recent high-frequency indicators suggest some improvement in global economic activity, the outlook is now tempered by additional downside risks from financial stability concerns.”
“Amidst this volatility, the banking and nonbanking financial service sector in India remain healthy, and financial markets have evolved, in an orderly manner. Economic activity remains resilient, and real GDP growth is expected to have been 7 per cent in FY23,” Das said.
“Headline inflation is moderating, but remains well above the targets of the central bank. These developments have led to heightened volatility in global financial markets, Das said. He added that the current financial year points towards softening of inflation.
The war against inflation will continue until there is a durable decline, Das said, adding that the central bank has projected inflation to marginally decline to 5.2 per cent in FY24.
For Q1 FY2024, the inflation is projected at 5.1 per cent, followed by 5.4 per cent in the second and third quarters and 5.2 per cent in the fourth quarter of the current financial year.
Liquidity and rupee
RBI governor Das also said that India’s current account deficit will remain moderate in Q4 FY23 and also eminently manageable going forward.
The RBI will maintain an agile approach for liquidity management to manage the government’s borrowing programme in a non-disruptive manner, Das said.
Das added, “Indian Rupee moved in an orderly manner in FY23.” He further said that the RBI will remain watchful of the currency.
