Chennai, Dec 08, 2023, IANS
As predicted by economists, the Reserve Bank of India's Monetary Policy Committee (MPC) did not change the repo rate from 6.5 per cent.
Announcing the decision of the MPC after its three-day deliberations, RBI Governor Shaktikanta Das said on Friday that the committee unanimously decided to keep the repo rate at 6.5 per cent.
The MPC met on December 6-8.
He also said that five out of six MPC members voted for the continued stance of withdrawal of accommodation.
Das said taking into account the economic factors, the MPC has predicted GDP growth at 7 per cent in FY24.
As regards the inflation rate, the MPC forecast was 5.4 per cent for 2023-24 taking into account the various domestic issues, including potential agricultural produce.
Das also said uncertainty exists due to the geopolitical situation.
The MPC is alert and prepared to take necessary actions that are needed, he said.
Reacting to RBI-MPC not taking its fingers from the pause button, Suman Chowdhury, Chief Economist and Head - Research, Acuité Ratings & Research said the intensity of hawkishness in the policy statement has clearly subsided and a balance has been brought in.
Similarly the Chief Economist of CARE Ratings Rajani Sinha told IANS that the Friday’s monetary policy statement of RBI had a lesser hawkish undertone compared to the preceding October statement.
Chowdhury said: "Clearly, RBI is more optimistic on the domestic growth prospects after the release of GDP data for the second quarter which placed GDP growth for H1 at 7.7 per cent YoY. Compared to its earlier growth forecast of 6.50 per cent for FY24, the revised growth forecast of the central bank stands materially higher at 7.0 per cent. Given the expected moderation in rural demand in H2 and the weaker private consumption growth at 3.1 per cent in Q2FY23, Acuité Research has, however, pegged the growth forecast relatively lower at 6.50 per cent .”
He said the RBI-MPC may not reduce the repo rate before the second half of calendar year 2024.
According to Dhiraj Relli, MD & CEO, HDFC Securities is of the view that the rate cut perhaps may happen during the first quarter of FY25 which would be data dependent.
Meanwhile CARE Ratings Sinha said: “The upward revision of the GDP growth forecast for FY24 to 7 per cent, coupled with the absence of any reference to future OMO (open market operations) sales, represents a favourable development for both the economy and the markets.”
However, it is crucial to remain attentive to certain underlying factors that can increase economic headwinds. Following the projected contraction in Kharif production, close monitoring of the progress in rabi sowing is imperative, particularly in light of lower reservoir levels in certain regions, Sinha said.
“The RBI’s FY25 GDP forecast for the first three quarters (Q1-6.7 per cent Q2-6.5 per cent, Q3-6.4 per cent) looks healthy as well. On inflation, despite risks on account of patchy perishables, the MPC outlook is unchanged at 5.4 per cent for FY24,” Madhavi Arora, Lead Economist, Emkay Global Financial Services said.
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