The Indian central bank raised the benchmark interest rate again, taking it to the highest in four years. At 6.25%, the repo rate (the interest paid by banks to borrow money from the RBI), is the highest since February 2019.
The Reserve Bank of India hiked the repo rate by 25 basis points to 6.5%, Governor Shaktikanta Das announced the decision of the monetary policy committee which was passed by a majority of 4 members of 6 members. This was the first Monetary Policy Statement of the year. In December 2022, the repo rate was raised by 0.35 percentage points to 6.25%. There was no change in the reverse repo rate of 3.35%.
The real GDP growth for 2023-24 is projected at 6.4% with Q1 at 7.8%, Q2 at 6.2%, Q3 at 6% & Q4 at 5.8%. The standing deposit facility rate will stand revised to 6.25% and the marginal standing facility rate and the bank rate to 6.75%. The MPC also decided by a majority of 4 out of 6 to remain focussed on the withdrawal of accommodation to ensure that inflation remains within target going forward while supporting growth.
The global economic outlook is not as grim as it was a few months ago, Das said. Inflation still remains well above the target in major economies. The situation remains fluid and uncertain, Das said. Indian economy remains resilient, RBI Governor Shaktikanta Das said adding that the real GDP growth is estimated at 7% in 2023-23. "Looking ahead while inflation is expected to moderate in 2023-24, it is likely to roll above the 4% target. The outlook is clouded by continuing uncertainties from geopolitical tensions, global financial market volatility, rising non-oil commodity prices and volatile crude oil prices," Das said.
