RBI monetary policy: Shaktikanta Das-led MPC keeps repo rate steady at 6.50%. Predicts 6.5% GDP growth in FY24

RBI Monetary Policy Meeting:

RBI Monetary Policy Meeting: In a bid to maintain the upward trend of micro and macroeconomic growth in India, the Monetary Policy Committee (MPC) headed by Shaktikanta Das unanimously decided to keep the repo rate unchanged at 6.50 percent for the third consecutive meeting. The RBI governor also reiterated that the MPC has maintained its “accommodative” stance on a rate hike.

Announcing the outcome of the RBI Monetary Policy Committee meeting, RBI Governor Shaktikanta Das said, “The Monetary Policy Committee has unanimously decided to keep the repo rate unchanged at 6.50 percent.”

The RBI governor added that the Indian economy is the fifth largest in the world and India’s contribution to global growth is 15 percent. He said that despite challenges in the global economy, India has managed to keep inflation under control. He said that Indian banks have substantial cash reserves, indicating smooth availability of credit for the various infrastructure projects.

RBI’s prediction on GDP growth in FY24

RBI Governor Shaktikanta Das went on to add that India’s inflation at 6. 4 per cent in Q1FY24 is in line with the RBI’s expectations. However, he predicted correction in vegetable prices in next few months. He said that overall inflation in the financial year 2023-24 is expected to remain at 6.5 per cent.

CPI inflation in FY24

The RBI Governor said that challenges from the high interest regime in global economy is expected to keep putting pressure on India’s growth theme and said that consumer price index (CPI) to remain at 5.40 per cent in FY24, which stood at 5.1 per cent in FY23. So, retail inflation in FY24 is expected at 5.4 per cent against 5.1 per cent in FY23.

Speaking on RBI policy meeting outcome, Pratapsingh Nathani, Chairman & MD at Beacon Trusteeship said, “In its monthly policy statement, RBI continued to maintain its old stance of maintaining the repo rate at 6.50% however being watchful on inflation target of 4% & over the sudden spurt in agricultural prices (onion tomato cereal & pulses). CPI Inflation has moderated by 100 bps from January 2023 so there is a feeling that there may be some spike in inflation due to agri prices but will correct within the next couple of months. While the Indian economy is shows signs of robustness, RBI will continue to use instruments available to them in controlling inflation on an ongoing basis.”

The RBI monetary policy committee (MPC) announced the first bi-monthly policy for FY24 on April 6. The MPC, led by RBI Governor Shaktikanta Das, met on April 3, 5 and 6 to review the current monetary policy. In this RBI MPC meeting, experts were expecting 25 bps interest rate hike to 6.75 per cent. But, RBI MPC thought otherwise and kept repo rate unchanged a 6.50 per cent. Later on in June 2023 MPC meeting too, the RBI MPC had decided to keep the repo rate steady at 6.50 per cent.