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In its latest Monetary Policy Committee (MPC) meeting held on February 8, the Reserve Bank of India (RBI) opted to keep its key policy rate unchanged at 6.5 percent, marking the sixth consecutive occasion of maintaining a status quo. The decision, announced by RBI Governor Shaktikanta Das, underscores the central bank’s commitment to fostering stability amidst ongoing economic uncertainties.
Governor Das highlighted the persistent uncertainty in food prices as a factor impacting headline inflation, while also noting the sustained momentum in domestic economic activities. Emphasizing the need for an actively dis-inflationary monetary policy stance, Das reiterated the importance of anchoring inflation expectations within the target range.
The decision to maintain the status quo on the policy rate saw five out of six MPC members voting in favor, signaling a broad consensus on the prevailing economic conditions and the appropriate monetary policy response.
Looking ahead, Governor Das provided insights into the global economic outlook, projecting steady global growth in 2024 with variations across regions. Despite subdued global trade momentum, signs of recovery are emerging, with expectations of accelerated growth in the coming year. Additionally, inflationary pressures have softened considerably and are anticipated to further moderate in 2024, providing a favorable backdrop for monetary policy decisions.
This decision follows the previous MPC meeting held on December 8, where the central bank also opted to maintain the repo rate unchanged for the fifth consecutive time. During that meeting, Governor Das had revised the growth projection for the current financial year upwards to 7 percent, reflecting the resilience and potential of the Indian economy amidst challenges.
The MPC, tasked with determining the policy repo rate to achieve the inflation target while fostering growth, operates within the framework of promoting economic stability and sustainable development.
Despite a decline in retail inflation from its peak in July 2023, the current inflation rate, at 5.69 percent in December 2023, remains elevated albeit within the RBI’s comfort zone of 4-6 percent. This underscores the ongoing challenges in managing inflationary pressures amidst evolving economic dynamics.
Governor Das’ recent remarks echo his earlier sentiments regarding the Indian economy’s growth prospects and inflation trajectory. He had expressed optimism about achieving a growth rate of 7 percent in the upcoming financial year, alongside expectations of further easing in inflation. Additionally, he credited the government for its structural reforms, which have bolstered the economy’s medium and long-term growth potential.
As India charts its path towards economic recovery and sustainable growth, both monetary and fiscal policies remain crucial instruments in navigating uncertainties and fostering resilience. With a focus on reducing the budget deficit and advancing long-term reforms, policymakers aim to steer the economy towards a trajectory of inclusive and sustainable development.
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