Reserve Bank of India (RBI) Governor Shaktikanta Das. File
| Photo Credit: Reuters

The Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday (August 8) announced the bi-monthly monetary policy statement, keeping the repo rate, which is the central bank’s rate for short-term loans to banks, unchanged at 6.5%.

In the Monetary Policy Committee (MPC) meeting, majority members voted to hold the rates. Four voted in favour and two against. Following the policy announcement, Mr. Das will hold a press conference at 12 p.m. on Thursday, which will be streamed live on the RBI’s X handle.

The RBI Governor, speaking at the Bombay Chamber of Commerce and Industry, projected the real GDP growth for the current financial year at 7.2%. RBI has adjusted its CPI inflation forecast for FY25 to 4.4%.

Also read | Policy repo rate unchanged at 6.5%; real GDP growth for FY25 projected at 7%

India’s GDP growth estimates and inflation forecast will be key to watch out for in the RBI policy on Thursday.

Inflation continues to be a significant factor influencing the RBI’s monetary policy stance. Despite core inflation being contained and a noticeable 15-20% drop in commodity prices, especially metals, from their 2024 peak, food inflation remains problematic. Experts emphasize that inflation in India still exceeds the RBI’s target range, making it unlikely for the central bank to cut rates until inflation aligns with the 4% target.

Men watch stock news on a display screen as Sensex opens. File.
| Photo Credit: ANI

Benchmark equity indices jumped in late morning trade on June 7, extending their rally to the third straight session, after the RBI decided to keep the policy rate unchanged for the eighth time in a row, in line with market expectations.

Buying in IT stocks added to the positive trend in markets.

The 30-share BSE Sensex jumped 907.43 points to 75,981.94 during the late morning trade. The NSE Nifty went up by 260.95 points to 23,082.35.

Interest rate-sensitive bank, realty and auto stocks were trading with gains.

In the past two days, the BSE benchmark surged 2,995.46 points or 4.15% after Tuesday’s massive rout.

The Reserve Bank of India (RBI) on Friday decided to keep the policy rate unchanged for the eighth time in a row, saying it will maintain a tight vigil on inflation.

Announcing the second bi-monthly monetary policy for the current financial year, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5%.

Among the 30 Sensex companies, Wipro, Infosys, Tech Mahindra, Bajaj Finserv, Tata Steel and Tata Consultancy Services were among the biggest gainers.

Maruti, IndusInd Bank, Hindustan Unilever and ITC were the laggards.

In Asian markets, Seoul quoted with gains while Tokyo, Shanghai and Hong Kong traded lower.

US markets ended on a mixed note on Thursday.

Global oil benchmark Brent crude climbed 0.26% to $80.08 a barrel.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 6,867.72 crore on Thursday, according to exchange data.

Regaining the 75,000 level, the BSE benchmark jumped 692.27 points or 0.933% to settle at 75,074.51 on Thursday. The Nifty climbed 201.05 points or 0.89% to 22,821.40.

RBI Governor Shaktikanta Das on June 7, 2024, said the Monetary Policy Committee has decided to keep the repo rate unchanged at 6.5%. File
| Photo Credit: ANI

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 6.5%. The decision, taken at the MPC’s meeting on Friday, marks the eighth time in a row that the policy rate has been put on hold to keep the focus on battling high inflation.

The MPC has revised its GDP growth forecast upwards from the earlier 7% estimate to 7.2% for the financial year 2024-2025. It has also decided to remain focused on withdrawal of accommodation to ensure that inflation does not accelerate, while supporting growth.

“These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2% while supporting growth,” Reserve Bank of India (RBI) governor Shaktikanta Das said after the meeting. 

Divided MPC

Mr. Das, along with MPC members Shashanka Bhide, Rajiv Ranjan, and Michael Debabrata Patra voted to keep the policy repo rate unchanged at 6.5% and to remain focused on the withdrawal of accommodation, while their colleagues Ashima Goyal and Jayanth R. Varma voted to reduce the policy repo rate by 25 basis points and for a change in stance to neutral. 

“There were signs of a more divided policy committee, with one additional member voting for a softening in stance as well as policy direction. The majority retained their cautious stance to guide inflation towards the 4% target on a durable basis, despite recent signs of disinflation,” said Radhika Rao, Executive Director and Senior Economist, DBS Bank, commenting on the decision.

Higher growth forecast

According to the MPC, high frequency indicators of domestic activity are showing resilience in 2024-25. The south-west monsoon is expected to be above normal, which augurs well for agriculture and rural demand, but headwinds from geopolitical tensions, volatility in international commodity prices, and geoeconomic fragmentation pose risks to the outlook. 

Taking various factors into consideration, real GDP growth for 2024-25 was projected at 7.2% as compared with the earlier projection of 7%, with the first quarter (Q1) growth estimate at 7.3%; Q2 at 7.2%; Q3 at 7.3%; and Q4 at 7.2%. The risks are evenly balanced.

Elevated food inflation

Emphasising that inflation has seen sequential moderation since February 2024, albeit in a narrow range from 5.1% in February to 4.8% in April 2024, the RBI Governor said that food inflation, however, remains elevated due to persistence of inflation pressures in vegetables, pulses, cereals, and spices. 

“Looking ahead, overlapping shocks engendered by rising incidence of adverse climate events impart considerable uncertainty to the food inflation trajectory,” he said, while announcing the MPC’s decisions. He added that volatility in crude oil prices and financial markets, along with the firming up of non-energy commodity prices, pose upside risks to inflation. 

Taking various factors into account, CPI inflation for 2024-25 is projected at 4.5%, with Q1 at 4.9%; Q2 at 3.8%; Q3 at 4.6%; and Q4 at 4.5%. The risks are evenly balanced.

Mr. Das emphasised that the path of disinflation has been interrupted by volatile and elevated food inflation due to adverse weather events. “Inflation is expected to temporarily fall below the target during Q2:2024-25 due to favourable base effect, before reversing subsequently. The MPC will remain resolute in its commitment to aligning inflation to the 4% target on a durable basis,” he said. 

The MPC reiterated the need to continue with the disinflationary stance, until a durable alignment of the headline CPI inflation with the target is achieved. 

Going ahead, food price uncertainties would continue to weigh on the inflation outlook. An expected record rabi wheat production in 2023-24, however, will help contain cereal prices, the RBI said while announcing the Monetary Policy’s decision on maintaining the CPI inflation rate.

Early indications of a normal monsoon also augur well for the kharif season. On the other hand, the increasing incidence of climate shocks remains a key upside risk to food prices. 

Low reservoir levels, especially in the southern States and outlook of above normal temperatures during April-June, also pose concern. Tight demand supply conditions in certain pulses and the prices of key vegetables need close monitoring. 

Fuel price deflation is likely to deepen in the near term following the recent cut in LPG prices. After witnessing sustained moderation, cost push pressures faced by firms are showing upward bias. The recent firming up of international crude oil prices warrants close monitoring. 

Geo-political tensions and volatility in financial markets also pose risks to the inflation outlook, RBI added. 

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| Photo Credit: Reuters

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The Monetary Policy Committee (MPC) of the Reserve Bank of India on August 10 decided unanimously to keep the policy repo rate unchanged at 6.50%. 
| Photo Credit: The Hindu

The Monetary Policy Committee (MPC) of the Reserve Bank of India on August 10 decided unanimously to keep the policy repo rate unchanged at 6.50%. 

Announcing the bi-monthly monetary policy on Friday, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 6.5 per cent.

The Governor said the real GDP growth for 2023-24 is projected at 6.5%. The latest CPI inflation projection for 2023-24 is at 5.4%, the same as projected previously. Indian forex reserves stood at $586.9 billion as on September 29.

Mr. Das said inflation is likely to ease in September, and the MPC would remain watchful of inflation and remain resolute in aligning inflation to the targeted level. Near-term inflation to soften on lowering of vegetable price and reduction in cooking gas cylinder rate, he added.

Domestic economy exhibits resilience on the back of strong demand, the Governor added.

Private sector capex is gaining ground as suggested by production of capital goods, he said.

The transmission of 250 basis point repo rate cut is still incomplete, the RBI Governor said.

The indications are that food inflation may not see sustained easing in Q3, the Governor added.

RBI may have to consider open market operation with regard to G-secs to manage liquidity, Mr. Das said.

RBI also has decided to double the gold loan under the bullet payment scheme to ₹4 lakh for Urban Cooperative Banks. The Payment Infrastructure Development Fund scheme has been extended by two years to December 2025. Internal Ombudsman Scheme to be further fine-tuned to safeguard the interest of customers, the Governor said.

The government has mandated the RBI to keep CPI inflation at 4 per cent with a margin of 2 per cent on either side.

The Monetary Policy Committee has unanimously decided to keep the policy repo rate unchanged, RBI Governor Shaktikanta Das said in Mumbai on August 10, 2023.
| Photo Credit: Emmanual Yogini

The Monetary Policy Committee (MPC) of the Reserve Bank of India on August 10 decided unanimously to keep the policy repo rate unchanged at 6.50%. 

Consequently, the standing deposit facility (SDF) rate remains at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%. 

The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.

Explaining the MPC’s rationale for these decisions on the policy rate and the stance, RBI governor Shaktikanta Das in his statement said, “Headline inflation, after reaching a low of 4.3% in May 2023, rose in June and is expected to surge during July-August led by vegetable prices.”

“While the vegetable price shock may reverse quickly, possible El Niño weather conditions along with global food prices need to be watched closely against the backdrop of a skewed south-west monsoon so far. These developments warrant a heightened vigil on the evolving inflation trajectory,” he said. 

“The cumulative rate hike of 250 basis points undertaken by the MPC is working its way into the economy. Nonetheless, domestic economic activity is holding up well and is likely to retain its momentum, despite weak external demand. Considering this confluence of factors, the MPC decided to remain watchful and evaluate the emerging situation,” he added. 

Consequently, the MPC decided to keep the policy repo rate unchanged at 6.50% with preparedness to act, should the situation so warrant, Mr. Das said. 

He said the MPC remained resolute in its commitment to aligning inflation to the 4 per cent target and anchoring inflation expectations.

Taking all various factors into consideration, the Governor said the real GDP growth for 2023-24 is projected at 6.5% with Q1 at 8.0%; Q2 at 6.5%; Q3 at 6.0%; and Q4 at 5.7%. Real GDP growth for Q1:2024-25 is projected at 6.6%. The risks are evenly balanced.

Given the continuing external uncertainties, the latest CPI inflation projection for 2023-24, assuming a normal monsoon, has been revised to 5.4%, with Q2 at 6.2%, Q3 at 5.7% and Q4 at 5.2%. CPI inflation for Q1:2024-25 is projected at 5.2%. The risks are evenly balanced.

The Governor said considering the difficulties in major economies, the Indian economy is better placed. “India can become the new growth engine of the world,” he said.