Key takeaways from RBI monetary policy

6 Apr 2023 , 11:24 AM

RBI Policy Update

RBI Governor:

• RBI kept REPO Rate unchanged 6.5% with readiness to act if situations warrant.
• SDF rate unchanged at 6.25%.
• MSF rate unchanged at 6.75%.
• India’s central bank to remain focused on “withdrawal of accommodation” stance while supporting growth.
• MPC decided 5 out of 6 majority to remain focus on removal of accommodation to reduce inflation and support growth.
• Rate unchanged for this meeting only.

On Global economy

2023 started on a good note. However, global economy is facing renewed phase of turbulence with Bank failures overseas which has brought financial stability into focus.

On Indian economy:-

• Rabi food grain production is expected to increase by 6.2% in 2022-23.
• GDP growth recorded in 2022-23 @7%.
• Economic activity in India remains resilient.
• Passenger vehicle sales and credit card spending saw robust growth. Consumer durables contracted in January.
• Private consumptions showing signs of slowing.
• Rural demand indicators such as consumer non-durables such as tractor and 2-wheeler sales registered healthy growth.
• PMI manufacturing recorded at 55.4 indicating expansion for 21 consecutive months due to favourable economic demand
• PMI for services remained in expansion mode at 57.8 in March.
• Non food bank credit growth grew by 15.4% YoY as on March 2023.
• Supply chains returning to normalcy.
• Banking and non-banking financial system remains healthy with strong capital and liquidity buffers, better provision coverage and improved profitability.

On GDP growth:-

• GDP grew by 7% in FY23.
• FY24 Real GDP growth projection increased to 6.5% from 6.4% with Q1 at 7.8%, Q2 at 6.2% Q3 6.1% and Q4 at 5.9%.

On Inflation:-

• Inflation is likely to remain above the target. Adjusted for inflation, policy rates continue to be accommodative.
• Higher rabi output likely to ease inflation.
• Core Inflation remains elevated. Milk prices likely to remain firm.
• Inflation is projected to moderate to 5.2% for FY 23-24, with Q1 at 5.1%, Q2 at 5.4%, Q3 at 5.4% and Q4 at 5.2%.

On Liquidity

• RBI to remain flexible in meeting productive requirements of the economy and use two-way operations as may be necessary.
• RBI will complete Government’s borrowing programme in a non-disruptive manner.

On Currency:-

• Indian rupee moved in orderly manner.
• Shows resilience of Indian Economy against global economic headwinds and shows strength of micros.
• CAD stood at 2.7% of GDP in first three months of 2023. Expected to remain moderate in Fourth quarter of FY23 and remain eminently manageable in FY24.
• Forex reserves back above $600 billion.