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In the recent Monetary Policy Committee (MPC) meeting held by the Reserve Bank of India (RBI) in June 2023, Governor Shaktikanta Das announced that the policy repo rate would remain unchanged at 6.50 per cent. This decision was made unanimously by the MPC, with a majority of five out of six members also emphasizing the importance of focusing on the "withdrawal of accommodation" to ensure a gradual alignment of inflation with the target while supporting economic growth.
Inflation Outlook and Global Economic Conditions
Governor Das highlighted that the headline inflation currently exceeds the target of 4 per cent and is expected to remain above the target throughout the year. Additionally, he stated that global economic activity is projected to decelerate in 2023 due to factors such as elevated inflation, tight financial conditions, and geopolitical tensions. These ongoing challenges are contributing to uncertainties regarding the future trajectory of monetary tightening worldwide.
GDP Growth Projections
The RBI governor provided insights into the projected GDP growth for the fiscal year 2023-2024. The forecast indicates that the first quarter is expected to experience a growth rate of 8 per cent, followed by 6.5 per cent, 6 per cent, and 5.7 per cent in the subsequent quarters, respectively. For the full fiscal year, the RBI retains the GDP growth projection at 6.5 per cent. However, it has lowered the retail inflation projection for FY24 to 5.1 per cent, down from the previous estimate of 5.2 per cent.
Previous Policy Measures
In April, the MPC unanimously decided to maintain the repo rate at 6.50 per cent, marking the continuation of a series of rate hikes initiated in May 2022. These measures were implemented to curb inflationary pressures in the country. The RBI has consistently emphasized its stance on the “withdrawal of accommodation” in its bimonthly meetings, aiming to maintain price stability.
Interest Rates and Facilities
Governor Das confirmed that the standing deposit facility (SDF) rates remain unchanged at 6.25 per cent, while the marginal standing facility (MSF) rate and the bank rates stand at 6.75 per cent.
The RBI’s Monetary Policy Committee meeting in June 2023 reaffirmed the decision to keep the policy repo rate unchanged at 6.50 per cent. With a majority of five out of six members emphasizing the “withdrawal of accommodation,” the RBI aims to gradually align inflation with the target while supporting economic growth. Despite challenges in global economic conditions, the RBI retains its GDP growth projection for the fiscal year 2023-2024 at 6.5 per cent. The central bank’s ongoing commitment to price stability and its prudent monetary policy approach reflects its efforts to ensure a balanced economic environment.