Reserve Bank of India Maintains Repo Rate at 6.5% for the Fifth Consecutive Time: A Closer Look at the Monetary Policy Committee's Decision
The Reserve Bank of India's Monetary Policy Committee has kept the repo rate stable at 6.5% for the fifth consecutive time, citing a 5:1 majority decision to support growth while ensuring inflation remains within target. Explore the details of the committee's decision, the economic backdrop, and projections for India's GDP growth.
Introduction:
In its latest monetary policy review meeting, the Reserve Bank of India (RBI) decided to keep the repo rate unchanged at 6.5%, marking the fifth consecutive instance of maintaining stability in interest rates. The Monetary Policy Committee (MPC) made this decision with a 5:1 majority, aiming to provide support for economic growth while keeping a close eye on inflation.
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| Monetary Policy Committee Kept the repo rate stable at 6.5% for the 5th time. |
Economic Overview:
India's economy exhibited resilience, recording a growth of 7.6% in the July-September quarter. This growth surpassed the survey average of 6.8% and the RBI estimate of 6.5%. The impressive performance was attributed to government spending and a robust manufacturing sector, solidifying India's position as Asia's third-largest economy. Projections indicate that the economy will continue to outperform its own expectations.
Inflation Outlook:
The RBI has estimated consumer price-based inflation (CPI) at 5.4% for the current financial year. Notably, inflation experienced a decline to a four-month low of 4.87% in October. The government has instructed the RBI to maintain CPI inflation at 4%, with a margin of 2% on either side. The MPC, having previously increased the repo rate by 250 basis points from May 2022 to February 2023, opted to pause any further rate hikes.
Key Rates Maintained:
The standing deposit facility rate remains at 6.25%, and both the marginal standing facility rate and bank rate are held steady at 6.75%. These decisions are in line with the MPC's strategy to balance economic growth and inflation control.
GDP Growth Projections:
Citing the decline in inflation as a significant factor, the RBI Governor announced a revised real GDP growth rate of 7% for the current financial year (2023-24), surpassing the earlier projection of 6.5%. Additionally, projections for the first quarter of the financial year 2024-25 indicate a growth rate of 6.7%, followed by 6.5% in the second quarter and 6.4% in the third quarter.
UPI Transaction Limit Increase:
In a notable move, the RBI has proposed an increase in the UPI transaction limit for hospitals and educational institutions. The limit is set to rise from Rs 1 lakh to Rs 5 lakh, reflecting the central bank's efforts to facilitate larger transactions in these sectors.
FAQs:
Q: What is the repo rate set by the RBI?
The RBI has maintained the repo rate at 6.5% for the fifth consecutive time.
Q: What influenced the MPC's decision to keep rates unchanged?
The MPC's decision, made with a 5:1 majority, aims to support economic growth while ensuring inflation remains within the target.
Q: How much did India's economy grow in the July-September quarter?
India's economy recorded a growth of 7.6% in the July-September quarter, surpassing both the survey average and the RBI estimate.
Q: What is the government's target for CPI inflation, and how has the RBI responded?
The government has set a target of 4% CPI inflation with a margin of 2% on either side. The RBI paused rate hikes after earlier increases.
Q: What are the key rates that have been maintained by the RBI?
The standing deposit facility rate is at 6.25%, while the marginal standing facility rate and bank rate are held at 6.75%.
Q: What is the revised GDP growth rate for the current financial year?
The revised real GDP growth rate for the current financial year (2023-24) is proposed to be 7%, up from the earlier projection of 6.5%.
Q: What is the proposed increase in the UPI transaction limit?
The RBI has proposed an increase in the UPI transaction limit for hospitals and educational institutions from Rs 1 lakh to Rs 5 lakh.
Conclusion:
The RBI's decision to maintain the repo rate and the associated economic indicators paint a picture of cautious optimism. Balancing growth and inflation control remains a priority, and the revised GDP growth projections signal positive momentum for India's economic landscape.
