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RBI holds repo rate steady at 6.5% amidst optimistic economic projections

RBI projects FY 25 GDP at 7 per cent

NEW DELHI: In its latest bi-monthly policy announcement, the Reserve Bank of India (RBI) has opted to maintain the benchmark interest rate (repo rate) at 6.5%, in line with market expectations.

This decision marks the sixth consecutive time that the RBI has refrained from altering the rate for the financial year 2023–24, underscoring stability in monetary policy.

Governor Shaktikanta Das, leading the Monetary Policy Committee (MPC), also announced unchanged rates for the deposit facility and marginal standing facility, remaining at 6.25% and 6.75%, respectively.

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The MPC’s primary focus remains on gradually withdrawing accommodation to ensure that inflation aligns with the target while supporting economic growth. Governor Das emphasised this commitment, stating, “The MPC also decided by a majority of five out of six members to remain focused on the ‘Withdrawal of Accommodation’ to ensure that inflation progressively aligns with the target while supporting growth.”

Despite retaining the repo rate, the RBI projects a robust real GDP growth of 7% for the upcoming financial year 2024–25, surpassing previous estimates. The forecast includes growth rates of 7.2% in the first quarter and 6.8% in the second quarter, with sustained growth momentum expected throughout the year.

Acknowledging the resilience of the domestic economy, Governor Das highlighted encouraging signs across various sectors. He noted a resurgence in rural demand, resilient urban consumption, and a revival in private investments, indicating a favourable economic outlook.

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Furthermore, recent GDP figures for the second quarter of the fiscal year 2023-24 revealed an expansion of 7.6%, surpassing analysts’ expectations and reinforcing optimism regarding economic recovery.

Inflation projections remain moderate, with the CPI inflation rate for the current year estimated at 5.4% and a downward trend anticipated for the next fiscal year, FY25, with a projected rate of 4.5%. These projections provide further reassurance regarding price stability in the economy.

Governor Das expressed confidence in the continuity of economic momentum, stating, “The momentum of 2023-24 is expected to continue in 2024-25 fiscal.” Despite a slight adjustment in GDP growth projections for the next financial year, optimism prevails regarding sustained economic expansion.

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