Shaktikanta Das, governor of the Reserve Bank of India, announced on Thursday that following three days of discussion, the Monetary Policy Committee has opted to hold the key policy repo rate at 6.5 percent, maintaining the status quo for a third straight time.
According to Shaktikanta Das, the MPC decided by a margin of 5:1 to retain the “withdrawal of accommodation” posture in order to sustain growth while ensuring that inflation gradually converges with the target. The RBI governor stated that as a result, the bank rate and the marginal standing facility rate (MSF) are both 6.75 percent. The standing deposit facility (SDF) rate is still 6.25 percent.
The Indian economy is showing signs of increased stability and strength. India is in a unique position to gain from the current economic transformation taking place around the world. The Indian economy has advanced significantly in containing inflation, according to him. For the foreseeable future, he continued, global growth will continue to be below average by historical norms, and the RBI is ready to take appropriate action if necessary.
“Our economy has continued to expand at a fair rate, moving up to the fifth-largest position in the world and making an estimated 15% contribution to overall growth. Additionally, we have made important strides towards controlling inflation,” he added.
After falling to a low of 4.3% in May 2023, according to Shaktikanta Das, the headline inflation rate increased in June and is forecast to increase significantly between July and August, driven primarily by vegetable costs. While the shock in vegetable prices may soon subside, probable El Nio weather conditions as well as world food costs need to be properly monitored in light of the current skewed south-west monsoon. These events necessitate increased attention to the trajectory of inflation as it changes.
The RBI downgraded its CPI inflation predictions for 2023–24 to 5.4%, with Q2 at 6.2%, Q3 at 5.7%, and Q4 at 5.2%. It is anticipated that CPI inflation would be 5.2% in Q1 of FY2024–25.
The return of Rs 2000 banknotes to the banking system, the RBI’s surplus transfer to the government, an increase in government spending, and capital inflows, according to the RBI, have all improved the state of the financial markets recently. “The overall daily absorption under the liquidity adjustment facility (LAF) was Rs 1.7 lakh crore in June and Rs 1.8 lakh crore in July 2023,” said Shaktikanta Das.
