The RBI’s financial coverage committee on Friday determined to maintain the repo fee unchanged at 6.5 per cent, unanimously. This is the fifth time in a row that the central financial institution has paused the important thing rates of interest. The RBI has raised the FY24 GDP projection to 7 per cent, from 6.5 per cent earlier. It has stored inflation projection unchanged at 5.4 per cent for 2023-24.
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With 5 out of six members voting in favour, the RBI MPC stays focussed on the “withdrawal of accommodation”.
Presenting the fifth bi-month-to-month financial coverage of FY24, RBI Governor Shaktikanta Das on Friday stated, “2023 will go down as a year of great volatility. The long-awaited normalcy still eludes the global economy. The global economy is showing signs of slowdown though unevenly across geographies. Headline inflation has receded from its peak levels.”
He stated the Indian economic system reveals resilience and momentum, amid world slowdown.
The RBI MPC on Friday additionally stored the SDF unchanged at 6.25 per cent, and MSF and Bank Rates maintained at 6.75 per cent. The SDF is the decrease band of the rate of interest hall, whereas the MSF is the higher band.
FY24 Growth Forecast
On the Indian economic system, RBI Governor Shaktikanta Das on Friday stated, “Economic activity exhibited buoyancy in Q2 aided by strong domestic demand. GDP posted a robust growth of 7.6 per cent in Q2:2023-24, driven by investment and government consumption.”
He added that this unsettled world financial backdrop, the Indian economic system presents an image of resilience and momentum. The actual gross home product (GDP) progress for Q2 of the present monetary 12 months has exceeded all forecasts. The fundamentals of the Indian economic system stay robust with banks and corporates exhibiting more healthy steadiness sheets; fiscal consolidation on target; exterior steadiness remaining eminently manageable; and foreign exchange reserves offering cushion in opposition to exterior shocks.
“These factors, combined with consumer and business optimism, create congenial conditions for sustained growth of the Indian economy. Looking ahead, it is our endeavour to further build on these fundamentals which are the best buffer against global shocks in today’s uncertain world,” he stated.
The RBI forecasts that actual GDP progress for 2023-24 is projected at 7.0 per cent with Q3 at 6.5 per cent; and This fall at 6.0 per cent. Real GDP progress for Q1:2024-25 is projected at 6.7 per cent; Q2 at 6.5 per cent; and Q3 at 6.4 per cent.
“The protracted geopolitical turmoil, volatility in global financial markets and growing geo-economic fragmentations, however, pose risks to the outlook,” Das stated.
Vivek Iyer, companion at Grant Thornton Bharat, stated, “Given the political stability reiterated with the state elections win by the party backing the central government and the strong macroeconomic growth driven from the Indian hinterland and a good flow of foreign investments in India, the GDP growth forecast northward revision seems fair.”
FY24 Inflation Projections
On inflation, the RBI governor stated, “Going ahead, the inflation outlook would be considerably influenced by uncertain food prices. High-frequency food price indicators point to an increase in prices of key vegetables which may push CPI inflation higher in the near term. The ongoing rabi sowing progress for key crops like wheat, spices and pulses needs to be closely monitored. Elevated global sugar prices is also a matter of concern.”
He stated that on the constructive aspect, world commodity costs, notably, agricultural commodity costs, have softened besides rice.
The RBI now tasks CPI inflation at 5.4 per cent for 2023-24, with Q3 at 5.6 per cent and This fall at 5.2 per cent. CPI inflation for Q1:2024-25 is projected at 5.2 per cent; Q2 at 4.0 per cent; and Q3 at 4.7 per cent.
Home Loan EMIs
With the established order, house mortgage pursuits are more likely to stay unchanged, bringing slight aid for these paying house mortgage EMIs.
Mohit Jain, managing director of Krisumi Corporation, stated, “The Reserve Bank of India’s decision to maintain interest rates aims to tame inflation within its targeted range. This translates to a welcome pause in the upward trajectory of bank-offered home loan rates, thereby ensuring EMI stability for borrowers.”
He added that this constructive improvement bodes nicely for the housing market, because it fuels continued momentum in gross sales throughout varied property segments, together with reasonably priced, mid-vary, and luxurious housing all through varied areas for the foreseeable future.
