06-Oct-2023
2 mins read
In a recent move by the Reserve Bank of India (RBI), the Monetary Policy Committee (MPC) has maintained the status quo on the policy repo rate, holding it steady at 6.5%. This decision comes after a comprehensive assessment of India’s current macroeconomic and financial scene.
Key Takeaways from the RBI Announcement:
- The repo rate remains unchanged at 6.5%.
- This marks the fourth consecutive time that the repo rate has been kept constant.
- The RBI aims to ensure retail inflation stays within a 4% target.
Consistent Stance on Repo Rate
The MPC, headed by Governor Shaktikanta Das, has, for the fourth time, opted not to adjust the benchmark repo rate. Notably, this comes after an aggressive hike in the rate by 250 basis points spanning from May of the previous year to April 2023.
Recovery from the Twin Balance Sheet Crisis
Governor Das highlighted the transformation of India’s economic framework over the past decade. He remarked on the past issues with twin balance sheet stress and proudly noted the current state, describing it as a “twin balance sheet advantage”. This hints at a more robust economic scenario, with both banks and corporates boasting healthier balance sheets.
Inflation and RBI’s Projections
| Month/Quarter | Inflation Rate |
| Aug-23 | 6.83% |
| Jul-23 | 7.44% |
| Q2FY24 (Forecast) | 6.40% |
| Q3FY24 (Forecast) | 5.60% |
| Q4FY24 (Forecast) | 5.20% |
| Q1FY25 (Forecast) | 5.20% |
Ensuring Inflation Remains in Check
With the mandate from the central government, RBI is focusing on maintaining the Consumer Price Index (CPI)-based inflation around 4%, with a flexibility of 2% on either side. Despite seeing inflation rates touching the upper boundary of the set tolerance band multiple times this year, the governor remains optimistic. He anticipates a potential ease in retail inflation in September but also voiced concerns regarding a decrease in kharif sowing that might pose challenges.
Outlook for India’s Economic Growth
The RBI has upheld its forecast for the real GDP growth for the fiscal year 2023-24 at 6.5%. This aligns with the bank’s commitment to fostering macroeconomic stability, as emphasised by Governor Das during the announcement.
India continues to journey through the complexities of global economic shifts. With the RBI’s consistent approach towards ensuring stability and inclusive growth, the country remains poised to navigate the intricacies of the global economy.