In its second policy statement for the financial year 2023-24, the Reserve Bank of India’s monetary policy committee (MPC) has chosen to maintain the current rbi repo rate of 6.5%. The MPC meeting, which commenced on June 6, 2023, also resulted in the decision to keep the marginal standing facility and bank rates unchanged at 6.75%, while the standing deposit facility rate remains at 6.25%. RBI Governor Shaktikanta Das emphasized that the MPC’s policy approach remains centered on gradually withdrawing accommodation in order to align inflation with the target while supporting economic growth.
RBI Repo Rate at 6.5% in MPC’s Second Policy Statement
Governor Das announced that the Indian economy and its financial sector continue to display resilience, with strong macroeconomic fundamentals and a positive trajectory in rural demand. He also mentioned a potential easing of inflation across various categories and optimistic expectations for the upcoming kharif crops, driven by a normal monsoon forecast.
During the previous policy meeting in April, the MPC unanimously opted to maintain a pause in rate hikes, keeping the repo rate unchanged at 6.50%. The repo rate has already risen by 250 basis points since its lows in May 2022 and stands 135 basis points higher than the pre-pandemic rate of 5.15%.
Additionally, global central bank rate actions indicate that, out of 147 countries, 95 economies have maintained their rates, while the policy rate increased in only 43 countries.
The MPC of the Reserve Bank of India also anticipates that headline inflation will remain above 4% throughout the fiscal year 2023-24.
Governor Das had previously mentioned that the decision to pause the repo rate depends on the prevailing circumstances, taking into account the outlook, trends, and inflation build-up.
Regarding economic growth, the Reserve Bank of India estimates an increase in the first two quarters, while projections have been lowered for the last two quarters of the fiscal year. The GDP is forecasted to grow at 6.5% in 2023-24, with real GDP expected to grow at 8% in Q1, 6.5% in Q2, 6% in Q3, and 5.7% in Q4.