The Reserve Bank of India has kept the benchmark repo rate unchanged at 6.5% after a two-day monetary policy meeting
The RBI forecast a 6.5% GDP expansion in 2023-24, lower than a GDP growth of 7.2% for 2022-23, accounting for inflation at 5.1% in the current fiscal.
Under Indian regulations the RBI must explain to the government the reasons for failing to meet its inflation target and recommend remedial actions, if inflation exceeds targets for three straight quarters.
Governor Shaktikanta Das on Wednesday said inflation was trending down, based on which the decision to hit the pause button was taken unanimously by the six-member RBI monetary policy committee.
‘We have made good progress in containing inflation, supporting growth, and maintaining financial sector stability, Das said. We need to ensure that long-term inflation remains firmly anchored. RBI is watchful, proactive in dealing with emerging risks to price and financial stability.’
Indias current account deficit should be ’eminently manageable’ in FY24 according to the governor.
According to the latest official data, the countrys fiscal deficit for the last financial year narrowed to 6.4%, meeting the governments target.
The deficit target for 2023-24 has been pegged at 5.9% of the GDP.
The RBI raised Indias key lending rate by 250 basis points between May 2022 and February 2022. It decided to keep rates unchanged in its last review on April 2023.
In April 2023, the Consumer Price Index-based inflation eased to 4.7%, the second consecutive month when retail price growth came within the RBIs upper tolerance limit of 6%.
Future hikes cannot be ruled out with a widely predicted El Nino weather pattern, although that delaying the onset of the monsoon need not be a concern, as the IMD announced its arrival in Kerala.