Reserve Bank keeps repo rate unchanged at 6.5%
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Thursday made the official decision to keep the repo rate unchanged at 6.5%, news agency ANI quoted RBI Governor Shaktikanta Das as saying. The second bi-monthly monetary policy meeting for the fiscal year 2023-24 took place over three days, beginning on Tuesday this week and concluding on Thursday.
Why does this story matter?
The MPC had also kept the repo rate at 6.5% in its first bi-monthly policy meeting, which took place last month on April 6. Since last May, the repo rate has been raised by a total of 250 basis points in an attempt to bring down inflation. Notably, India's retail inflation fell to an 18-month low of 4.7% in April.
Real GDP growth for FY24 projected at 6.5%
The governor of the RBI also announced that real GDP growth for FY24 is projected at 6.5%, with the first quarter at 8%, the second at 6.5%, the third at 6%, and the fourth at 5.7%. Das also stated that domestic demand conditions remain supportive of growth, while rural demand is growing, and urban demand remains resilient, reported the news outlet Economic Times.
MPC kept repo rate at 6.5% in April
Das further said that headline inflation is higher than the target of 4% and is set to stay higher for the rest of the year. In March, India's headline inflation rate was 5.66%. The RBI has also lowered its inflation projection to 5.1% from 5.2%.
India's GDP growth
Furthermore, Das said that the committee has decided to focus on the withdrawal of accommodation, with a 5-1 vote in favor of it. The Indian economy posted a better-than-expected Q4 GDP report of 6.1% in the March quarter, raising India's FY23 growth to 7.2%. It also exceeded the 7% growth forecast in the second advance estimate released in February.
RBI governor's statement in full
"Consequently, the Standing Deposit Facility (SDF rate) remains at 6.25% and the marginal standing facility and the bank rates stand at 6.75%," said Das. "The MPC also decided by a majority of five out of six members to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth," he added.
