Bhubaneswar: RBI governor Shaktikanta Das on Friday said the country’s economy is an island of stability despite two Black Swan events and multiple shocks. The Monetary Policy Committee (MPC) on Friday increased the repo rate by 50 basis points to 5.40 percent. Back to pre-pandemic levels, and guided on withdrawal of the accommodative stance. The central bank maintained a status quo on its FY23 GDP and Inflation projections at 7.2%/6.7% respectively.
Key highlights of RBI Policy Update:
RBI raises REPO Rate by 50 bps to 5.4% from 4.9%, back to pre-pandemic levels.
SDF rate adjusts to 5.15, Previously 4.65%.
MSF rate at 5.65%, Previously 5.15%.
Bank rates adjust to 5.65% from 5.15%.
India’s central bank to be focused on the “withdrawal of accommodation” stance.
RBI sees no change in FY23 Inflation at 6.7% seen previously, Governor also mentioned that inflation has increased beyond the upper tolerance level.
RBI retains India’s FY23 GDP growth at 7.2%.
GDP Growth forecast for FY24 is 6.7%.
India’s debt to GDP, net international investment position to GDP ratio, and debt service ratio declined, imparting greater resilience from external shocks.
External debt to GDP ratio fell from 21.2% to 19.9% in March 2022.
Net international investment position to GDP ratio improved from -13.2% to 11.6%.
Debt service ratio declined from 8.2% to 5.2% in FY21-22.
Financial sector remains well capitalized and sound, says the RBI Governor.
India’s foreign exchange reserves placed at $573.9bn, provides insurance against global spillovers.
Successive shocks to the global economy taking a toll.
IMF has revised the global growth projection downwards.
CPI is expected to remain above upper tolerance levels.
India is facing a $13.3 billion capital outflow in last few months.
Bank credit growth has accelerated to 14% against 7.9% a year ago.
Domestic economic activity showing signs of broadening, rural demand shows mix trend.
Rupee has fared much better than many reserve currencies or Asian currencies, Says the governor.
RBI sees India’s FY23 Real GDP growth retained at 7.2%. Real GDP growth forecast for Q1 is 16.2%, Q2 at 6.2%, Q3 is project to be at 4.1% while Q1 FY24 real GDP Growth is projected to be at 4%.
RBI’s CPI inflation forecasted retained at 6.7% for FY23 with an assumption of normal monsoon and crude at 105/barrel. Inflation for Q2 is projected at 7.1%, Q3 at 6.4%, Q4 is project to be at 5.6% while Q1 FY24 CPI inflation is projected to be at 5%.
Rupee depreciation has happened in an orderly fashion. RBI remains watchful and focused on maintaining the stability of the Indian Rupee. The surplus liquidity has come down in the Banking sector from 6.7 lakh crore in May to 3.8 lakh crore in July.