RBI Policy Update RBI raises REPO Rate by 50 bps to 5.4% from 4.9%, back to pre-pandemic levels, and guided on withdrawal of the accommodative stance. The central bank maintained a status quo on its FY23 GDP and Inflation projections at 7.2%/6.7% respectively. Please find below key highlights of RBI Policy Update. Key Highlights: |
| - RBI raises REPO Rate by 50 bps to 5.4% from 4.9%, back to pre-pandemic levels
- SDF rate adjusts to 5.15, Previously 4.65%
- MSF rate at 5.65%, Previously 5.15%
- Bank rates adjust to 5.65% from 5.15%
- India’s central bank to be focused on the “withdrawal of accommodation” stance
- RBI sees no change in FY23 Inflation at 6.7% seen previously, Governor also mentioned that inflation has increased beyond the upper tolerance level
- RBI retains India’s FY23 GDP growth at 7.2%
- GDP Growth forecast for FY24 is 6.7%
- India’s debt to GDP, net international investment position to GDP ratio, and debt service ratio declined, imparting greater resilience from external shocks.
- The external debt to GDP ratio fell from 21.2% to 19.9% in March 2022
- Net international investment position to GDP ratio improved from -13.2% to 11.6%.
- The debt service ratio declined from 8.2% to 5.2% in FY21-22
- The financial sector remains well capitalized and sound, says the RBI Governor.
- India’s foreign exchange reserves placed at $573.9bn, provides insurance against global spillovers.
- Successive shocks to the global economy taking a toll
- IMF has revised the global growth projection downwards
- CPI is expected to remain above upper tolerance levels
- India is facing a $13.3 billion capital outflow in the last few months
- Bank credit growth has accelerated to 14% against 7.9% a year ago
- Domestic economic activity showing signs of broadening, rural demand shows mix trend.
- Rupee has fared much better than many reserve currencies or Asian currencies, Says the governor
- RBI sees India’s FY23 Real GDP growth retained at 7.2%. Real GDP growth forecast for Q1 is 16.2%, Q2 at 6.2%, Q3 is project to be at 4.1% while Q1 FY24 real GDP Growth is projected to be at 4%
- RBI’s CPI inflation forecasted retained at 6.7% for FY23 with an assumption of normal monsoon and crude at 105/barrel. Inflation for Q2 is projected at 7.1%, Q3 at 6.4%, Q4 is project to be at 5.6% while Q1 FY24 CPI inflation is projected to be at 5%
- Rupee depreciation has happened in an orderly fashion. RBI remains watchful and focused on maintaining the stability of the Indian Rupee
- The surplus liquidity has come down in the Banking sector from 6.7 lakh crore in May to 3.8 lakh crore in July
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