Reserve Bank of India (RBI) Governor Shaktikanta Das revealed the outcomes of Friday’s three-day Monetary Policy Committee (MPC) meeting. Highlighting the robust state of the Indian economy, Das noted positive indicators such as healthier balance sheets for banks and corporates, fiscal consolidation progress, and manageable external balances. He emphasized the congruence of these factors, along with consumer and business optimism, fostering conditions for sustained economic growth. The RBI’s focus is on building upon these fundamentals as a buffer against global uncertainties.
Maintaining the policy stance of “withdrawal of accommodation” to align with the 6% (+/-2) inflation target, the RBI aims to support economic expansion while curbing the money supply to manage inflationary pressures. The benchmark policy rate (repo) remains unchanged, reflecting the central bank’s commitment to facilitating credit and investments crucial for economic growth.
Key Decisions by the Monetary Policy Committee:
Repo Rate Unchanged: The RBI keeps the benchmark interest rate at 6.5%, signaling stability in its monetary policy approach.
UPI Transaction Limit Increase: The MPC proposes a significant enhancement in the UPI transaction limit for payments to hospitals and educational institutions, raising it from ₹1 lakh to ₹5 lakh.
Revised GDP Growth Projection: The RBI raises the GDP growth projection for the current fiscal year to 7%, up from the earlier estimate of 6.5%. The growth outlook for the December and March quarters is pegged at 6.5% and 6%, respectively.
Retail Inflation Projection: The average retail inflation projection for 2023-24 is retained at 5.4%, with the outlook considerably influenced by uncertain food prices. Potential intermittent shocks in vegetable prices may impact headline inflation in November and December.
Forex Reserves: As of December 1, forex reserves stood at $604 billion, providing confidence in meeting external financing requirements comfortably.
The MPC’s decisions reflect a balanced approach aimed at sustaining economic growth while managing inflationary pressures. The increase in the UPI transaction limit seeks to facilitate larger transactions for payments to hospitals and educational institutions. With a positive GDP growth projection, the RBI remains cautiously optimistic about the economic trajectory, emphasizing the need to build on strong fundamentals as a resilience measure against global uncertainties.
