Reserve Bank of India's MPC Keeps Policy Rates Unchanged Amidst Resilient Economic Outlook

 भारतीय रिज़र्व बैंक की एमपीसी ने लचीले आर्थिक परिदृश्य के बीच नीतिगत दरों को अपरिवर्तित रखा है

The Monetary Policy Committee (MPC) of the Reserve Bank of India concluded its meeting on December 8, 2023, deciding to maintain the policy repo rate under the liquidity adjustment facility (LAF) at 6.50 percent. The standing deposit facility (SDF) rate remains steady at 6.25 percent, while the marginal standing facility (MSF) rate and the Bank Rate are retained at 6.75 percent.

The MPC aims to sustain the withdrawal of accommodation to align inflation progressively to the targeted level while supporting economic growth. The decisions are in line with the goal of achieving the medium-term consumer price index (CPI) inflation target of 4 percent within a +/- 2 percent band.

Economic Assessment and Projections

Amidst a global slowdown in growth and ebbing inflation, the domestic economy continues to exhibit resilience. India's real gross domestic product (GDP) expanded by 7.6 percent year-on-year in Q2:2023-24, buoyed by robust investments and government consumption. Buoyant manufacturing, construction activities, and improving rural sectors are anticipated to bolster household consumption and investment outlook.

The projection for real GDP growth for 2023-24 stands at 7.0 percent, with the risks evenly balanced. However, headline inflation fell to 4.9 percent in October 2023, owing to price corrections in certain vegetables and moderation in core inflation, excluding food and fuel.

Challenges and Future Course

Despite the positive economic indicators, uncertainties persist in food prices, posing risks to inflation. The coming months may witness a rise in headline inflation due to volatile vegetable prices. Monetary policy aims to actively curb inflation towards the 4 percent target while closely monitoring the evolving situation.

Governor Shaktikanta Das highlighted the need for vigilant monetary policy given the elevated food inflation and potential volatility ahead. The MPC emphasizes a pause in rate action to focus on withdrawing accommodation gradually, aligning with the pursuit of achieving the inflation target.

The committee remains watchful, acknowledging the resilience in GDP growth but stressing the necessity of a cautious approach in monetary policy decisions to sustain the disinflationary path.