08-Dec-2023
2 mins read
In its latest monetary policy review, the Reserve Bank of India (RBI) has once again decided to maintain the repo rate at a steady 6.5%. This marks the fifth consecutive instance of the rate remaining unchanged, demonstrating the RBI’s commitment to a balanced economic approach.
Inflation and Growth
The RBI’s decision comes against a backdrop of encouraging economic indicators. Despite a total increase of 250 basis points in the repo rate since May 2022 to curb inflation, the Indian economy has shown resilience. October saw inflation fall to a four-month low at 4.87%, suggesting the effectiveness of the central bank’s measures. However, RBI Governor Shaktikanta Das highlighted ongoing vigilance, particularly with potential food inflation pressures in the near future.
Monetary Committee’s Deliberation
The Monetary Policy Committee (MPC) of RBI, which undertook a detailed analysis of the macroeconomic situation, voted by a majority of 5:1 to continue its focus on withdrawing accommodation. This strategy aims to align inflation with the set target while still fostering economic growth.
A Global Perspective
Governor Das also noted the resilience of emerging market economies amidst global economic volatility. While global inflation has eased from its recent peaks, core inflation remains a concern in several economies.
India’s Economic Performance
India’s economy outpaced expectations with a 7.6% growth in the July-September quarter, surpassing both pooled estimates and the RBI’s own forecast. This surge is attributed to government spending and robust manufacturing activity, fueling optimism that India could exceed its full-year growth projections.
Inflation Forecast and Mandate
The Reserve Bank of India projects a 5.4% inflation rate, as measured by the Consumer Price Index (CPI), for the current fiscal year. This estimate complies with the government’s requirement for the RBI to regulate CPI inflation around 4%, with a tolerance margin of plus or minus 2%.
The RBI’s balanced approach reflects its ongoing commitment to managing inflation while supporting economic growth, offering a stable outlook for India’s financial future.