‘Never lose your faith in the destiny of India’, RBI Governor Shaktikanta Das quoted Subash Chandra Bose today, as the Monetary Policy Committee (MPC) hiked interest rates by 25 basis points, taking the repo rate to 6.5%. Governor Das kept focus on withdrawal of monetary policy accommodation, considering that the inflation has continued to hover above the Reserve Bank of India’s target of 4% for the past one year. Das said he expects inflation to hover at 5% in the next financial year. Here are four highlights from RBI’s Monetary Policy that support Governor Das’ assertion of faith in India.
India’s economic activity expected to hold up well, even amid global uncertainties
India’s inherent strength, enabling policy environment and strong macroeconomic fundamentals has led the country to deal with future challenges, Das said, adding that the Indian economy remains resilient amid volatile global developments. “The outlook is clouded by continuing uncertainties from geopolitical tensions, global financial market volatility, rising non-oil commodity prices and volatile crude oil prices. At the same time, economic activity in India is expected to hold up well,” he said.
Inflation cooling off; not quite on target yet, but within RBI’s comfort
While the global economic outlook doesn’t seem as grim as it was a few months ago, inflation remains well above the target in major economies. “Looking ahead, while inflation (in India) is expected to moderate in 2023-24, it is likely to rule above the 4% target. RBI Governor Shaktikanta Das said. Citing the RBI’s internal survey, he said, “manufacturing, services and infrastructure sector firms are optimistic about the business outlook.”
India’s rising forex reserves show strong economic position
India’s forex reserves have been rising for the past few months as foreign inflows increased, hinting that the country’s current forex reserves remain at a comfortable level. “RBI’s current forex reserves cover 9.4 months of projected imports. From July onwards, we have seen positive inflows of $8.5 billion until Feb 6,” said RBI Governor Shaktikanta Das. RBI will launch a pilot project on QR code-based coin vending machines in 12 cities.
RBI’s decision to provide UPI access to NRIs to make people’s lives easier
India’s Unified Payments Interface (UPI) has become a ubiquitous payment instrument for retail electronic payments in the country and RBI’s decision to provide access to non-resident Indians may make people’s lives easier. “An enhancement has recently been made to provide UPI access to non-resident Indians who have international mobile numbers linked to their NRE / NRO accounts. It is now proposed to permit all inbound travellers to India also to access UPI for their merchant payments (P2M) while they are in the country. To start with, this facility will be extended to travellers from the G-20 countries, arriving at select international airports. Going forward, this facility will be enabled across all other entry points in the country. Necessary operational instructions will be issued shortly,” RBI Governor said.