News Excerpt:

The RBI Governor Shaktikanta Das announced the first monetary policy of the financial year 2024-25. The policy broadly mirrored the last policy in both its tone and action.

Highlights of the policy:

• RBI decided to keep the key policy repo rate — the rate at which RBI lends money to banks to meet their short-term funding needs — unchanged for the seventh consecutive time at 6.5 percent as retail inflation continues to be above its target of 4%. 
• Uncertainties surrounding the food inflation trajectory have kept the monetary policy committee’s hands tied for a rate revision. 
• It also decided to maintain the stance at ‘withdrawal of accommodation’.
• India’s real GDP growth for FY25 is projected at 7%. 
• CPI inflation for FY25 is estimated at 4.5%.
• India's forex reserves reached an all-time high of USD 645.6 billion as of March 29.
• With rural demand catching up, consumption is expected to support economic growth in FY25.
• Outlook for agriculture, rural activity appears bright, with good rabi wheat crops and improved prospects of kharif crops, due to the expected normal monsoon.
• Strong rural demand, moderating inflationary pressures, and sustained momentum in the manufacturing and services sector will boost private consumption.
• The headwinds from protracted geopolitical tensions and increasing disruptions in trade routes, however, pose risks to the outlook.
• Strong growth momentum, along with GDP projections for 2024-25, gives RBI the policy space to unwaveringly focus on price stability.
• Net inflows by Foreign Portfolio Investors (FPI) stood at $41.6 billion during 2023-24, the second highest level of FPI inflow after 2014-15.
• India continues to be the largest recipient of remittances in the world.
• Current Account Deficit in 2024-25 to remain at a level that is both viable and eminently manageable.

Other announcements:

• Trading of Sovereign Green Bonds permitted in the International Financial Services Centre (IFSC).
• Introduction of a mobile app to access RBI’s Retail Direct Scheme for participation in the G-Sec market.
• To allow cash deposits in banks through UPI.
• UPI access for Prepaid Payment Instruments (PPIs) through third-party applications
• To allow non-bank payment system operators to offer Central Bank Digital Currency (CBDC) wallets.
• Dealing in rupee interest rate derivate products for all small finance banks
• No change in RBI's foreign exchange risk management policies. Regulations of the Foreign Exchange Management Act (FEMA) clearly state that exchange-traded currency derivatives "are for hedging only".