RBI MPC Keeps Repo Rate Unchanged at 6.5% for 7th Time in a Row
The Reserve Bank of India (RBI) has recently announced its decision to maintain the key repo rate at 6.5%. This move comes in the backdrop of the central bank’s continued focus on controlling inflation while navigating a robust growth trajectory.
Consistency in Monetary Policy
This marks the seventh consecutive instance where the 6-member Monetary Policy Committee (MPC) has opted to keep the key policy rates unchanged. The decision reflects a consistent approach towards monetary policy in recent times.
MPC’s Deliberations and Decision
RBI Governor Shaktikanta Das emphasized that the MPC arrived at this decision after a thorough assessment of macroeconomic and financial developments. The committee, with a majority of 5 to 1, voted in favor of maintaining the policy repo rate at 6.50%.
Unchanged Deposit Facilities
Alongside the key repo rate, the standing deposit facility (SDF) and the marginal standing facility also remain unchanged at 6.25% and 6.75%, respectively. This holistic approach ensures stability across various facets of monetary policy.
Economic Outlook and Priorities
Governor Das underscored the priority of achieving the 4% inflation target amidst a backdrop of robust economic growth. The focus on maintaining an actively disinflationary stance reflects the RBI’s commitment to price stability.
The Reserve Bank of India MPC meeting has estimated real growth rate for financial year 2024-25 at 7 per cent.
RBI Governor Das, while announcing the outcome of the MPC on Friday, said that growth in first quarter of FY25 is projected at 7.1 per cent, followed by 6.9 per cent in second quarter and 7 per cent each in both third and fourth quarters.
“Since the last policy, the growth inflation dynamics has played out favorably. Growth has continued its momentum surpassing all expectations. Headline inflation has eased to 5.1 per cent during both January and February,” Das said.
He said that the global economy has remained resilient with a stable outlook reflected in various high quality indicators.
“Credible consolidation plans particularly in major advanced economies focusing on growth-advancing investments would be necessary to address this challenge…India presents a different picture on account of its fiscal consolidation and faster GDP growth,” Das said.
The RBI Governor also said that the advance estimates for 2023-24 placed the real GDP growth at 7.6 per cent, which is the third successive year of 7 per cent or higher growth.
“Turning to domestic growth, domestic economic activity continues to expand at an accelerated pace, supported by fixed investment and an improving global environment,” Das said.
“The second advance estimates placed the real GDP growth at 7.6 percent for 2023-24, the third successive year of 7 per cent or higher growth,” he added.
Expert Insights and Market Response
Economists, such as Upasna Bhardwaj from Kotak Mahindra Bank, anticipated this decision. While acknowledging low core inflation as comforting, concerns persist regarding food inflation and external factors like higher US yields and oil prices.
Swati Saxena, CEO of 4 Thoughts Finance, echoed sentiments of stability and predictability. She anticipates a shallow rate cut cycle from June onwards to bolster lower interest rates and stimulate credit demand.
Future Prospects and Investor Sentiment
Looking ahead, there is cautious optimism that the RBI may consider rate cuts in the future, particularly to support lower interest rates and spur credit demand. This outlook is expected to buoy investor sentiment, reinforcing the market’s resilience.
RBI to soon launch app to enable retail investors to participate in govt bonds
The Reserve Bank on Friday announced the launch of a mobile app to enable retail investors to participate in government securities (G-Secs) or government bonds market.
RBI Retail Direct Scheme, launched in November 2021, gives access to individual investors to maintain gilt accounts with the RBI and invest in government securities.
The Scheme enables investors to buy securities in primary auctions as well as buy/sell securities through the Negotiated Dealing System – Order Matching system (NDS-OM) platform.
“To further improve ease of access, a mobile application of the Retail Direct portal is being developed. The app will enable investors to buy and sell instruments on the go, at their convenience. The app will be available for use shortly,” RBI Governor Shaktikanta Das said, while announcing the first bi-monthly monetary policy for the current fiscal.
The government is planning for gross market borrowing of Rs 14.13 lakh crore for 2024-25. Out of this Rs 7.5 lakh crore, or 53 per cent, is scheduled to be borrowed in the first half (H1).
Way Forward
Overall, the RBI’s decision reflects a balanced approach aimed at addressing inflation concerns while maintaining stability and predictability in monetary policy, fostering investor confidence in the market’s resilience.
