The Reserve Bank of India Governor Shaktikanta Das on Thursday said that after three days of deliberation, the Monetary Policy Committee has decided to keep the key policy repo rate unchanged at 6.5 percent, in line with the expectations. “MPC also decided by a majority of five out of 6 members to remain focused on withdrawal of accommodation to ensure inflation aligns with the target while supporting growth,” said RBI Governor Shaktikanta Das. RBI recognises that the pace of global economic activity is expected to decelerate on the back of elevated inflation, geo-political tension and tight financial conditions, he added. He also said that the standing deposit facility rate remained at 6.25 per cent, and marginal standing facility rate and bank rate remained unchanged at 6.75 per cent.
Shaktikanta Das said that MPC will take further monetary actions as required to keep inflation expectations firmly anchored. He maintained that the real policy rate continues to be positive and the average system liquidity is still in surplus mode and could increase as more Rs 2000 banknotes get deposited in banks. “MPC thus decided to remain focused on the withdrawal of accommodation to ensure inflation progressively remains within target while supporting growth,” he said.
The RBI governor also announced that headline inflation is expected to remain above 4 per cent throughout the 2023-24 fiscal. Further, flagging concern about inflation, he stated that there is a need for close and continued vigil on inflation and the central bank will also need to monitor the uncertainties around monsoon, international commodity prices and financial market volatility. “Headwinds from weak internal demand, volatility in the global financial market, protracted geopolitical tension and El Nino impact pose downside risk to growth outlook,” he said. Shaktikanta Das reiterated the need to maintain Arjuna’s eye on the inflation scenario as headline inflation still remains above the target of four percent. “Going forward, RBI will remain nimble in its liquidity management while ensuring ample availability to meet production needs of the economy,” he said, adding that long term rates have remained broadly stable.
The FY24 GDP growth projection remained unchanged at 6.5 per cent. Shaktikanta Das said that FY24 real GDP growth is projected at 6.5 per cent on the back of higher rabi crop output, moderating commodity prices, monsoon trajectory and the government’s plan of higher capital expenditure. Further, GDP growth in the first quarter of FY2024 is expected at 8 per cent, followed by 6.5 per cent in Q2, 6 per cent in Q3, and 5.7 per cent in Q4. The FY24 GDP projections for the second half of the year have been lowered marginally, while for the first half it has been raised from earlier projections, he said.
In terms of CPI inflation, RBI governor said that CPI inflation for FY24 is projected at 5.1 per cent. In April, the CPI inflation declined to an 18-month low of 4.7 per cent, from 5.7 per cent in March. For Q1, it is expected to be at 4.6 per cent, for the second quarter at 5.2 per cent, for the third quarter at 5.4 per cent and again 5.2 per cent in the fourth quarter.
