News Excerpt:

Governor Shaktikanta Das announced that the RBI's Monetary Policy Committee (MPC) held the repo rate steady at 6.5%, reiterating its focus on withdrawing accommodation.

RBI Monetary policy — Key highlights:

• RBI keeps the repo rate steady at 6.5% with five out of six members voting in favour of the rate decision Experts were also expecting the repo rate to remain steady at 6.5 percent.
• Policy Rates
  • Policy Repo Rate - 6.50%
  • Standing Deposit Facility Rate - 6.25%
  • Marginal Standing facility rate - 6.75%
  • Bank Rate - 6.75%
  • Fixed Reserved Repo Rate - 3.35%
• MPC also decided by a majority (5 out of 6 members) to remain focused on the withdrawal of accommodation to ensure the inflation progressively aligns with the target while supporting growth.
  • The Reserve Bank of India (RBI) has maintained its inflation projection at 5.4% for 2023–2024.
    • CPI inflation is predicted to be 4.5% for the upcoming fiscal year 2024–2025, with Q1 at 5%, Q2 at 4%, Q3 at 4.6%, and Q4 at 4.7%.
• Inflation moving closer to the target - On one hand, the odds of soft landing have increased with Inflation moving closer to the target and growth holding up better than expected in major advanced and emerging market economies.
• Red Sea crisis impacts uncertainty to the global macroeconomic outlook - Ongoing wars and conflicts and the emergence of now flashpoints in different parts of the world with the disruption in the Red Sea being the latest in the series impart uncertainty to the global macroeconomic outlook.
• PMI for manufacturing is displaying expansion - The Purchasing Managers Index (PMI) for manufacturing is displaying expansion along with strengthening of future activity index. Services sector activity is expected to remain resilient on the back of strong domestic demand and stable global prospects.
• CPI inflation for FY 2024-25 projected at 4.5% - Assuming a normal monsoon for the next year, CPI inflation for the next financial year  2024-25 is projected at 4.5 per cent.
• Inflation saw a significant moderation from the highs of summer of 2022 -. Over the last two years, the monetary policy has prioritized inflation over growth, undertaking calibrated increase in policy repo rate by 250 basis points and withdrawal of stimulus measures.
• Protection of customers interest is of paramount importance - The domestic financial system remains resilient with healthy balance sheets of banks and financial institutions. The financial parameters of non-banking financial companies (NBFC) are also improving in tandem with those of the banking system. Good governance, robust risk management, sound compliance culture and protection of customers interest are of paramount importance for the safety and stability of financial institutions as well as that of individual financial institutions. The Reserve Bank lays great emphasis on these aspects.
• CPI inflation target of 4 per cent is yet to be reached - Monetary policy in midst of these lingering uncertainties has to remain vigilant to ensure that we can successfully navigate the last mile of this inflation. Stable and low inflation at 4 percent will provide necessary bedrock for sustainable economic growth.
• Global growth is expected to remain steady in 2024 - RBI Governor Shaktikanta Das said that global public debt to GDP is projected to reach 100% by the end of this decade.
• GDP expected to grow at 7.3% during FY 2023-24 - As per the first advance estimates (FAE) released by the National Statistical Office (NSO), real gross domestic product (GDP) is expected to grow by 7.3 per cent, year-on-year in 2023-24, underpinned by strong investment activity.
• GVA expanded by 6.9% during 2023-24 - RBI Governor Shaktikanta Das said that India’s gross value added (GVA) expanded by 6.9 per cent in 2023-24, with manufacturing and services sectors serving as the key drivers.
• Reserve Bank will continue to support innovation in the financial sector - The governor said that let there be no doubt on the Reserve Bank’s commitment to promote fintechs, to promote innovation, to promote technology in the financial system.
• Net FDI stands at $13.5 billion in April-November 2023 against $19.8 billion a year ago period, RBI Governor -. Foreign portfolio investment (FPI) witnessed a sharp turnaround during 2023-24 (up to February 6) with net FPI inflows of US$ 32.4 billion as against net outflows of US$ 6.7.
• RBI releases quarterly estimates for CPI inflation, GDP growth.

• Agricultural activity holding up well despite lower rainfall - Rabi sowing has surpassed last year’s level as well as the normal acreage. The allied sector is also expected to provide major support to agriculture with continued momentum in horticulture and fisheries.
• Industrial activity in India is gaining steam - The early results of corporates in the manufacturing sector remain upbeat, driven by higher profit margins. The purchasing managers’ index (PMI) for manufacturing is displaying expansion along with strengthening of future activity index.
• RBI remains flexible in its liquidity management - The Reserve Bank remains nimble and flexible in its liquidity management through two-way main and fine-tuning operations, in both repo and reverse repo. We will deploy an appropriate mix of instruments to modulate both frictional and durable liquidity so as to ensure that money market interest rates evolve in an orderly manner and financial stability is maintained.