The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 6.5 percent, according to the monetary policy committee’s unanimous decision. State Bank of India Chairman Dinesh Khara stated that the decision was expected and that the committee’s communication was intended to establish future market expectations of inflation. The RBI‘s policy includes a range of development initiatives aimed at managing risk, resolution and innovation, while addressing market microstructure issues.
Inflation has declined continually to reach an 18-month low, leading the RBI to pause on the key interest rate once again. Despite inflation being a concern for multiple countries, including advanced economies, India has successfully steered its inflation trajectory. The RBI paused the repo rate in its April meeting, which was the first of 2023-24.
The RBI anticipates similar growth rates for India‘s 2023-24 GDP as previously estimated, which is 6.5 percent with projected Q1 performance at 8.0 percent, Q2 at 6.5 percent, Q3 at 6.0 percent, and Q4 at 5.7 percent. According to the National Statistical Office’s provisional estimates, real GDP growth for 2022-23 was 7.2 percent, which is higher than the predicted 7 percent. The government anticipates an upward revision in the 2022-23 GDP figures in the future.
Additionally, the RBI decreased India‘s inflation forecast for 2023-24 to 5.1 percent, down from its April projection of 5.2 percent. According to RBI Governor Shaktikanta Das, retail inflation (or Consumer Price Index) is anticipated to be 4.6 percent in Q1, 5.2 percent in Q2, 5.4 percent in Q3, and 5.2 percent in Q4. Headline inflation in India had dropped to 4.7 percent during March-April 2023, the lowest since November 2021. Governor Das emphasizes that remaining within the tolerance band of inflation is insufficient, and the RBI‘s aim is to achieve a target of 4.0 percent going forward.
