RBI MPC meeting: Key takeaways from Guv Shaktikanta Das' announcements

RBI MPC has decided to continue with the pause on repo rate at 6.5 per cent for the fourth time in a row

The Reserve Bank of India's (RBI) monetary policy committee (MPC) has decided to maintain the current repo rate. Announcing the decision, RBI Governor Shaktikanta Das stated it was a unanimous decision, and the central bank remains vigilant concerning the current global economic conditions.

This marks the fourth consecutive time that the rate-setting committee has held the repo rate steady. Between May 2022 and April 2023, it increased the repo rate by 250 basis points (bps).

RBI Policy: Key Takeaways from MPC Announcement

• The real gross domestic product (GDP) forecast for FY24 has been retained at 6.5 per cent. Das said that India is well-positioned to become the world's growth engine.
• The RBI MPC also resolved to stay focused on the withdrawal of accommodation with a 5:1 majority.
• The inflation projection for FY24 remains unchanged at 5.4 per cent. The forecast for Q2FY24 has been raised from 6.2 per cent to 6.4 per cent. For Q3FY24, the inflation projection has been lowered to 5.6 per cent from the previous 5.7 per cent. The projection for Q4FY24 remains at 5.2 per cent.
• For Q1FY25, the retail inflation projection has been held at 5.2 per cent.
• Das indicated that food inflation may not experience sustained easing in Q3FY24. He added that near-term inflation is expected to soften due to decreased vegetable prices and reduced cooking gas cylinder rates.
• Das also stated that the transmission of a 250 basis point repo rate hike is still incomplete.
• "Monetary policy should be in absolute readiness to tackle sudden food and fuel price rises," Das noted.
• The RBI Governor further commented that private sector capital expenditure is gaining momentum, as evidenced by the production of capital goods in the country.
• Moreover, the domestic economy is resilient, driven by strong demand, particularly in urban consumption.
• As of September 29, Indian forex reserves stood at $586.9 billion.
• RBI has also decided to double the gold loan under the bullet payment scheme to Rs 4 lakh for Urban Cooperative Banks.
• RBI may need to consider open market operations concerning government securities to manage liquidity in the economy.
• Das concluded that the banking system in India continues to be resilient due to improved asset quality. He added that the twin balance sheet problem has now evolved into a twin balance sheet advantage.