Indian Monetary Policy: The Reserve Bank of India (RBI) Governor, Shaktikanta Das, unveiled the Monetary Policy today, August 8. The RBI’s Monetary Policy Committee (MPC), which sets interest rates, held its third bi-monthly policy meeting for fiscal year 25 from August 6 to August 8. The RBI Governor-led six-member MPC left the benchmark repo rate constant at 6.5% and maintained the policy stance of ‘withdrawal of accommodation’.
Repo Rate Stability: The RBI has opted to keep the repo rate at 6.5%, marking the ninth straight meeting with this rate unchanged. This decision shows the committee’s prudent attitude despite inflation worries.
Inflation Monitoring: The MPC examined inflationary trends, with a focus on food inflation, which remains a worry. Four members decided to maintain current prices, while others recommended possible cutbacks.
Foreign reserves reach new highs As of May 31, 2024, India’s foreign exchange reserves hit a historic high of $651.5 billion, giving the RBI additional flexibility in ensuring price stability.
Key Highlights from Indian Monetary Policy
RBI MPC Meeting Highlights in 2024: RBI Governor Shaktikanta Das announced the first monetary policy for fiscal year 25. Here are the key components of the RBI’s April policy:
Policy Measures:
- The repo rate was constant at 6.5%.
- The policy attitude of ‘removal of accommodation’ kept the FY25 GDP growth forecast at 7%.
- Quarterly estimates are as follows: 7.1% in Q1, 6.9% in Q2, 7.1% in Q3, and 7.1% in Q4.
- The CPI inflation prediction for FY25 is 4.5%. Here are the detailed inflation projections: Q1: 4.9%; Q2: 3.8%; Q3: 4.6%; Q4: 4.5%.
Forecast for FY25 GDP Inflation
Q1 7.20% 4.50%
Q2 7.20% 3.80%
Q3 7.30% 4.60%
Q4 7.20% 4.50%
Non-Policy Measurements:
- The program for trading sovereign green bonds at the IFSC will be disclosed.
- Introducing a mobile app to access the RBI’s Retail Direct Scheme and participate in the GSec market.
- A draft circular for the LCR framework for banks will be issued shortly. Enabling UPI for Cash Deposits.
- UPI access for Prepaid Payment Instruments (PPIs) through third-party applications.
- Non-bank payment system operators distribute CBDCs.
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