RBI Monetary Policy - 8th Feb'2024

 

Key Highlights:

1. RBI kept the interest rates unchanged with the stance at ‘Withdrawal of Accommodation’.
2. The FY24 inflation forecasts were kept unchanged at 5.4%. However, the GDP forecast was revised upwards at 7.3% citing buoyant macroeconomic indicators and strong consumer demand.
3. Throwing water on the stance change expectations, Mr. Das highlighted that even though FY25 CPI forecast is 4.5%, the CPI inflation target continues to be 4.0%.

 

CPI and GDP Forecast
	CPI	GDP
FY24	5.4	7.3
FY25	4.5	7.0
Q1 FY25	5.0	7.2
Q2 FY25	4.0	6.8
Q3 FY25	4.6	7.0
Q4 FY25	4.7	6.9

 

4. RBI’s outlook on growth front remains positive. Inflations continues to remain above RBI’s tolerance band of 4-6%, driven by volatile vegetable prices.

 

5. Liquidity:
1. “Systemic liquidity turned into deficit in September 2023 after a gap of four-and-a-half years. But after adjusting for government cash balances, potential liquidity in the banking system is still in surplus,” Mr.Das said.
2. RBI would continue to be prudent in the liquidity management. The deficit since December is due to a confluence of seasonal and ad-hoc macro factors.

 

6. RBI’s fresh Acknowledgments:
1. Gov Das emphasised that the public debt to GDP ratio (esp. in Advanced Economies) is raising serious concerns, with global debt to GDP ratio expected to reach 100% by 2030.
2. However, unlike other nations, India might avoid this concern. As highlighted in the Interim budget, Indian Govt. is focussed on Fiscal consolidation, targeting to reduce its fiscal deficit to below 4.5% of GDP by 2025-26.