RBI keeps interest rates steady at 6.5pc, revises GDP growth outlook for 2023-24
A worker walks past the logo of Reserve Bank of India (RBI) inside its office in New Delhi
The Reserve Bank of India (RBI) has opted to maintain the status quo on interest rates, keeping the repo rates unchanged at 6.5 per cent, as announced by Governor Shaktikanta Das following the Monetary Policy Committee (MPC) meeting on Thursday.
This decision marks a continuation of the RBI's approach over the past year, where the repo rate has remained at 6.5 per cent since the last increase in February 2023, aimed at curbing inflation influenced by global factors.
"This decision underscores the central bank's cautious approach, balancing economic stability, and inflationary concerns in a volatile pre-election environment," Adhil Shetty, CEO of Bankbazaar.com said.
Shetty mentioned that in the current economic landscape, there is persistent concern about food inflation, whereas core inflation has exhibited signs of softening, prompting a positive response from the market.
He further noted that globally, growth remains stable, with indicators suggesting recovery in FY24.
However, Shetty also pointed out that central banks are exercising caution, prioritising financial stability before committing to major rate cuts.
On the subject of loans, Shetty noted, "While home buyers in India had hoped for rate reductions to bolster their purchasing confidence, the RBI's decision to maintain interest rates, albeit on the higher side, ensures loans remain relatively stable. Despite this, the residential real estate sector in India continues to show resilience, with an uptick in property purchases."
In addition to the interest rate decision, the RBI revised the GDP growth rate for the fiscal year 2023-24, indicating an upward adjustment from 7 per cent to 7.3 per cent.
The central bank also provided insights into its inflation outlook, projecting consumer inflation at 5.4 per cent for the current financial year (2023-24) and further anticipating a decrease to 4.5 per cent in the upcoming fiscal year (2024-25).
Despite a decline in retail inflation from its peak of 7.44 per cent in July 2023, the current rate stands at 5.69 per cent as of December 2023.
Shetty stated that rural demand remains robust, supported by the extension of welfare schemes, which further bolsters economic activity.
Additionally, hementioned that looking ahead, the projected real GDP growth for FY 2024-2025 stands at a promising 7 per cent, signalling optimism for sustained economic expansion.
While this remains elevated, it falls within the Reserve Bank's comfort zone of 4-6 per cent.