The RBI’s governors address today at the MPC meet at 10.00 am was filled with cautious optimism about the economy, inflation and growth.
The Reserve Bank of India’s monetary policy committee (MPC) on April 5 left the key repo rate unchanged at 6.5 percent for the seventh time in a row, in line with the market expectations, with its focus firmly on bringing inflation down.
Key takeaways
- RBI MPC decided to keep the repo rate unchanged at 6.5 per cent
- RBI has forecast the Indian economy to grow at 7 per cent in FY25.
- Forecast for each of the quarters in FY25 is at 7.2 per cent, 6.8 per cent, 7 per cent and 6.9 per cent respectively.
- CPI Inflation projection for FY25 is at 4.5 per cent.
- Cash deposit at ATMs with UPI
- Launching an app to facilitate retail participation in government securities
The governor mentioned that the growth in key sectors is in line with their predictions, and food inflation is to be monitored. In February, the consumer price index saw a significant increase of 5.09% compared to the previous year, surpassing the RBI’s target During the December quarter, remittances from overseas Indians reached a historic high of $29 billion. Giving his view on the currency, he has maintained the Indian rupee is the most stable among the other major currencies and it’s going to be range bound.
The governor commented on the CPI data as the elephant in the room. The elephant has now gone out for a walk and appears to be returning to the forest is his statement.
He has announced that the RBI is to launch a mobile app to facilitate retail participation in govt securities market and there will be facilities made to deposit cash at CDM’s using UPI.
Abheek Barua, Chief Economist, HDFC Bank, attributed on RBI MPC Announcement:
Given the recent global resilience in economic activity, there has been a tendency to keep monetary policy tight to take on the last mile challenge on inflation by global central banks. The RBI seems to be moving in lock step with that. Despite its emphasis that inflation is moderating, the RBI kept its policy rate and stance unchanged in today’s policy announcement. The central bank remained optimistic on growth – pegging it at 7% for FY25 – and said this provides space for monetary policy to remain tight and focus on inflation. Consequently, the chances of a rate cut have been pushed forward into the second half of FY25.
The RBI also reiterated its preference for a stable rupee and therefore significant depreciation due to recent global volatility seems unlikely. On the other hand, the RBI also signalled that it has enough appetite for building FX reserves and therefore expected rupee appreciation in the coming quarters (due to bond inflows among other things) could also face resistance.
On the regulatory front, the announcement of a review of the LCR framework considering the volatility in deposits due to the 24*7 transfer facility is a welcome step. Details on the same are awaited.
