RBI Keeps Policy Rate Steady, Reduces GDP Forecast to 6.6%
MUMBAI: The Reserve Bank of India (RBI) has decided to keep the policy rate unchanged for the 11th consecutive time but has significantly reduced the GDP forecast to 6.6%.
RbiPolicy RateGdp ForecastEconomic GrowthInflationReal Estate MumbaiDec 06, 2024
The Monetary Policy Committee (MPC) of the RBI, headed by Governor Shaktikanta Das, met this week to review the economic situation. The committee decided to maintain the repo rate at 4%, the reverse repo rate at 3.35%, and the marginal standing facility rate at 4.25%. This decision aligns with the RBI's stance of maintaining accommodative monetary policy to support economic recovery.
Despite the policy rate remaining unchanged, the RBI has expressed concerns about the economic outlook. The central bank cited several factors for the downward revision in the GDP forecast, including global economic headwinds, subdued domestic demand, and rising input costs. The revised GDP growth forecast of 6.6% for the current fiscal year is a significant reduction from the previous forecast of 7.2%.
The RBI also noted that inflation remains a key concern. While the inflation rate has moderated in recent months, it is still above the target range of 2-6%. The central bank expects inflation to remain elevated in the near term, primarily due to supply-side disruptions and higher commodity prices. However, it anticipates a gradual decline in inflation in the latter half of the fiscal year as supply conditions improve and global commodity prices stabilize.
To support the economy and ensure financial stability, the RBI has announced several measures. These include enhanced liquidity support for micro, small, and medium enterprises (MSMEs), increased focus on digital payments, and initiatives to improve credit flow to the agriculture sector. The central bank has also emphasized the need for proactive measures to address the rising bad loan problem and strengthen the financial sector.
The RBI's decision to keep the policy rate unchanged and reduce the GDP forecast has significant implications for various sectors of the economy. For businesses, it means that borrowing costs will remain low, which can support investment and expansion. However, the lower GDP forecast may dampen business sentiment and investment plans. For consumers, the low interest rates can make loans more affordable, but the economic slowdown may impact job creation and wage growth.
The Reserve Bank of India (RBI) is the central banking institution of India, responsible for the formulation and implementation of monetary policy, regulation of banks, and management of foreign exchange reserves. The RBI plays a crucial role in maintaining economic stability and promoting sustainable growth in the country.
In conclusion, the RBI's decision to keep the policy rate unchanged while reducing the GDP forecast reflects a cautious approach to managing the current economic environment. The central bank's measures to support liquidity, digital payments, and credit flow are aimed at fostering growth and financial stability. As the economy navigates these challenges, the RBI's role will remain vital in steering the country towards recovery and sustainable development.
Frequently Asked Questions
Why did the RBI keep the policy rate unchanged?
The RBI kept the policy rate unchanged to maintain an accommodative monetary policy that supports economic recovery and balances growth and inflation.
What is the new GDP forecast for the current fiscal year?
The new GDP forecast for the current fiscal year is 6.6%, down from the previous forecast of 7.2%.
What factors led to the downward revision in the GDP forecast?
The downward revision in the GDP forecast is due to global economic headwinds, subdued domestic demand, and rising input costs.
How does the RBI plan to support the economy?
The RBI plans to support the economy through enhanced liquidity support for MSMEs, increased focus on digital payments, and initiatives to improve credit flow to the agriculture sector.
What is the current inflation rate, and how does the RBI expect it to change in the future?
While the inflation rate has moderated, it remains above the target range of 2-6%. The RBI expects inflation to remain elevated in the near term but anticipates a gradual decline in the latter half of the fiscal year.
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