Tuesday, 25 June 2024
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FinanceIndia

6.5% repo rate is maintained by the Shaktikanta Das-led MPC

  • The Reserve Bank of India (RBI) has kept its key repo rate at 6.5%.
  • The third-quarter GDP growth of 8.4% in India and higher CPI inflation had an impact on the RBI’s decision.
  • The world economy is still strong, and solid indicators point to a steady future.

In light of forecasts for 4.5% CPI inflation and a 7% GDP growth in FY 2024–2025, the Reserve Bank of India (RBI) has kept its key repo rate at 6.5%.

The decision was taken at the first RBI MPC meeting of the new fiscal year, in spite of the uncertainty surrounding the global economy and the US Federal Reserve’s failure to begin the rate-cutting cycle.

GDP Growth

The third-quarter GDP growth of 8.4% in India and higher CPI inflation had an impact on the RBI’s decision. Because it controls system liquidity, the repo rate is important. Higher rates make borrowing more expensive for the average person, while lower rates make loans less expensive. The repo rate was raised by 250 basis points to 6.5% by the RBI after starting a cycle of rate hikes in 2022.

For the fiscal year 2024–2025, the Reserve Bank of India (RBI) has projected a real growth rate of 7.7%. 7.1% increase is anticipated in the first quarter of FY25, 6.9% in the second, and 7.1% in each of the third and fourth quarters.

Headline inflation eased to 5.1% in both January and February, according to RBI Governor Shaktikanata Das, who said that growth inflation dynamics had played out favorably.

The world economy is still strong, and solid indicators point to a steady future. The real GDP growth for 2023–2024 is expected to be 7.6%, the third year in a row of growth of 7% or more, according to RBI Governor Shaktikanta Das.

To facilitate retail investors’ participation in the government securities or bond markets, the RBI has also announced the release of a mobile app. For 2024–2025, the government intends to borrow a total of Rs 14.13 lakh crore, of which 53% will be borrowed in the first half.

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