RBI keeps repo rate unchanged at 6.5% over inflation concerns
The Reserve Bank of India (RBI) has decided to keep its key interest repo rate unchanged at 6.5%. It is the rate at which it lends short-term funds to banks. This is a signal that the central bank's battle against persistently high inflation is yet to be over. The rate-setting panel has also kept the monetary policy stance unchanged at the withdrawal of accommodation.
Sixth pause in a year
This marks the RBI's sixth consecutive pause in the past year. Since the April monetary policy back in 2023, RBI has kept the repo rate unchanged at 6.5%, after raising it by 250 basis points (bps) back in May 2022. This was done after inflation was showing signs of moderation. To note, one basis point is one-hundredth of a percentage point.
What about GDP growth?
RBI Governor Shaktikanta Das said uncertainty in food prices continues to impinge on headline inflation. Meanwhile, the momentum in domestic activities continues to be strong. The central bank has pegged India's real GDP at 7.3% for FY24. This marks the third successive year of growth. Global growth is also expected to remain steady in 2024.
Projections for headline inflation
Das said that headline inflation moderated to 5.5% in April-December last year, which is down from 6.7% in FY23. Headline CPI inflation for FY24 stands at 5.4%, with the projection for Q4 FY24, the current quarter, stands at 4.5%. CPI inflation projection for FY25 Q1 is 5%, for FY25 Q2 is 4%, for FY25 Q3 is 4.6%, and finally 4.7% for FY25 Q4.
India has a $622.5 billion forex reserve
In 2024, India will remain the highest recipient of remittances. The country's forex reserve now stands at $622.5 billion. It is comfortable for meeting all foreign obligations, as per the RBI Governor.