After the RBI’s decision to unanimously keep the repo rate unchanged at 6.5 per cent, State Bank of India chairman Dinesh Khara on Thursday said that the decision was on “expected lines”.
The repo rate is the rate of interest at which RBI lends to other banks. The Reserve Bank of India’s (RBI) monetary policy committee unanimously decided to keep the repo rate unchanged at 6.5 per cent. “The RBI decision to pause was largely on expected lines. The communication was nuanced and tailored to anchor market expectations for the future in terms of a durable glide path of inflation. The bouquet of policy changes on the development front covers a wide spectrum and prioritizes resolution, risk management, and digital innovation, and addresses issues relating to market microstructure. Overall, the policy is an apt statement in the backdrop of a global economy that is still mired in growth-related uncertainties and labour market rigidities,” said SBI chairman Dinesh Khara.
A consistent decline in inflation (currently at an 18-month low) and its potential for further decline may have prompted the central bank to put the brake on the key interest rate again.
Inflation has been a concern for many countries, including advanced economies, but India has managed to steer its inflation trajectory quite well. The RBI in its April meeting, the first in 2023-24, had paused the repo rate.
With regard to the GDP outlook, the RBI expects India’s 2023-24 growth to be similar to its earlier estimate of 6.5 per cent, with a quarter projected Q1 at 8.0 per cent, Q2 at 6.5 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent.
As per the provisional estimates released by the National Statistical Office (NSO) recently, real GDP growth for 2022-23 stood at 7.2 per cent, higher than the 7 per cent projected. The government expects an upward revision in the 2022-23 GDP numbers going ahead.
Further, RBI lowered India’s inflation projection for 2023-24 to 5.1 per cent against its April estimate of 5.2 per cent.
On a quarterly basis, retail inflation (or Consumer Price Index) in Q1 is seen at 4.6 per cent, Q2 at 5.2 per cent, Q3 at 5.4 per cent, and Q4 at 5.2 per cent, RBI Governor Shaktikanta Das said Thursday while reading out the monetary policy statement after a three-day deliberation.
India’s headline inflation has come down during March-April 2023 to 4.7 per cent in April, the lowest since November 2021.”Let me re-emphasise that headline inflation still remains above the target and being within the tolerance band is not enough. Our goal is to achieve the target of 4.0 per cent, going forward,” Das said.