Chennai
As anticipated by economists, the Reserve Bank of India’s Monetary Policy Committee (MPC) opted not to alter the repo rate, maintaining it at 6.5 per cent. RBI Governor Shaktikanta Das announced the unanimous decision of the committee after its three-day deliberations, also revealing that five out of six MPC members voted in favor of the continued stance of withdrawing accommodation. The MPC convened from December 6-8, and Das highlighted that considering economic factors, the committee foresees GDP growth at 7 per cent in FY24. Regarding the inflation rate, the MPC projected 5.4 per cent for 2023-24, factoring in various domestic issues, including potential agricultural produce. Das acknowledged existing uncertainty due to the geopolitical situation, emphasizing the MPC’s readiness to take necessary actions as needed. Reacting to the RBI-MPC’s decision to maintain the status quo, Chief Economist and Head of Research at Acuité Ratings & Research, Suman Chowdhury, noted a reduced intensity of hawkishness in the policy statement, bringing a balance. He highlighted the RBI’s increased optimism on domestic growth prospects, aligning with the release of GDP data for the second quarter, which placed H1 GDP growth at 7.7 per cent YoY. Chowdhury suggested that a repo rate reduction may not occur before the second half of calendar year 2024. On a similar note, Rajani Sinha, Chief Economist of CARE Ratings, observed a lesser hawkish undertone in Friday’s monetary policy statement compared to the October statement. Sinha highlighted the upward revision of the GDP growth forecast for FY24 to 7 per cent as a favorable development for both the economy and the markets. He also emphasized the absence of any reference to future open market operations (OMO) sales.
