RBI Monetary Policy 2024: Repo Rate Unchanged, GDP Growth at 7%, Inflation Targeted at 4.5%

RBI Monetary Policy 2024: Repo Rate Unchanged at 6.5%

Today, the Reserve Bank of India (RBI) Governor, Shaktikanta Das, presented the first monetary policy of the financial year 2024-25. The two-day meeting of the RBI's Monetary Policy Committee (MPC) began on April 3 and concluded today, April 5. Here are the key takeaways:

Repo Rate Unchanged at 6.5%

The RBI has decided to keep the key policy repo rate steady at 6.5%. This decision marks the seventh consecutive time the rate has remained unchanged. The six-member MPC, led by Governor Das, also affirmed the policy stance as ‘withdrawal of accommodation'.

GDP Growth Projection for FY25: 7%

The RBI has projected India’s real GDP growth rate for the fiscal year 2024-25 at a promising 7%. This indicates a positive outlook for the country's economic expansion.

Inflation Forecast at 4.5% for FY25

For the fiscal year 2024-25, the RBI estimates CPI inflation to be around 4.5%. This projection gives insight into the expected price stability for the upcoming year.

MPC Votes on Repo Rate and Stance

Dr. Shashanka Bhide, Dr. Ashima Goyal, Dr. Rajiv Ranjan, Dr. Michael Debabrata Patra, and Shri Shaktikanta Das voted to maintain the policy repo rate at 6.50% and continue with the stance of ‘withdrawal of accommodation'. Prof. Jayanth R. Varma voted for a 25 basis points reduction in the policy repo rate and a change in stance to ‘Neutral'.

Expert Opinion

• Suvodeep Rakshit of Kotak Equities noted that the decision to maintain rates and stance was in line with expectations. The focus remains on disinflation to achieve the 4% medium-term inflation target.
• Madhavi Arora from Emkay Global Financial Services emphasized the fluidity of global narratives and potential challenges for RBI's policy balancing.
• Tanvee Gupta Jain of UBS India suggested a shift to a ‘Neutral' stance in the June policy.
• Shraddha Umarji of Prabhudas Lilladher highlighted the importance of food inflation and the potential for a policy stance change to ‘Neutral' in June or August.

Policy Measures

• The RBI plans to distribute Central Bank Digital Currency (CBDC) through non-bank payment system operators, aiming for broader CBDC-Retail accessibility.
• Cash deposits at bank machines using UPI will be facilitated by the RBI, simplifying cash transactions.
• Investment and trading of sovereign green bonds in the International Financial Services Centre (IFSC) will be notified.
• The RBI will launch a mobile application for the Retail Direct Scheme to enhance access to the G-sec market.

The RBI's decision to maintain the repo rate at 6.5% aligns with its focus on balancing inflation and economic growth. The GDP growth projection of 7% for FY25 indicates optimism for the Indian economy. However, challenges such as food inflation persist, and the RBI remains vigilant with its policy stance of ‘withdrawal of accommodation'. Experts suggest potential shifts to a ‘Neutral' stance in upcoming policies, reflecting the evolving economic landscape.

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