RBI keeps repo rate unchanged as focus remains on inflation

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) at its meeting on Friday (5 April 2024) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent, for the seventh consecutive term.

Accordingly, the standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.

The MPC, however, said it would remain focused on withdrawal of accommodation to ensure that the consumer price inflation aligns with the 4 +/- 2 per cent upper limit of the target rate.

RBI said the domestic economy is on firm ground with real gross domestic product (GDP) expanding at 7.6 per cent in 2023-24 on the back of buoyant domestic demand. Real GDP increased by 8.4 per cent in Q3, with strong investment activity and a lower drag from net external demand. 

On the supply side, gross value added recorded a growth of 6.9 per cent in 2023-24, driven by manufacturing and construction activity.

RBI expects the economy to maintain the current growth momentum in the light of improved performance of agriculture and manufacturing sectors. Service sector activity is back to normal and is likely to grow above the pre-pandemic level.

Private consumption is expected to pick up with an increase in income and higher discretionary spending, as revealed by per the RBI’s consumer survey.

On the external front, RBI noted a resilience in the global economy and a likely steady growth in 2024. 

RBI has projected real GDP growth for 2024-25 at 7.0 per cent for Q1, 7.1 per cent for Q2, 6.9 per cent for Q3 and 7.0 per cent for Q4 and 7.0 per cent for the fiscal.