RBI Monetary Policy 2024 Highlights and Key Measures

RBI Monetary Policy 2024 Highlights

The Reserve Bank of India (RBI) Governor Shaktikanta Das announced the first monetary policy of the financial year 2024-25. The two-day review meeting of the RBI’s Monetary Policy Committee (MPC), the rate-setting panel, commenced on April 3 and concluded on April 5. The RBI decided to keep the key policy repo rate unchanged at 6.5% for the seventh consecutive time. The six-member MPC, headed by Governor Das, also decided to maintain the policy stance at ‘withdrawal of accommodation’.

GDP Growth and Inflation Projections

The RBI has projected India’s real GDP growth rate for FY25 at 7%. This projection is slightly lower than the 7.6% growth achieved in the previous fiscal year. The central bank also estimates that the Consumer Price Index (CPI) inflation for FY25 will be around 4.5%, lower than the 5.4% recorded in FY24.

Key Policy Measures and Forecasts

During the RBI’s April policy, several key measures were announced:

• The repo rate, which is the benchmark interest rate, was kept unchanged at 6.5%.
• The policy stance of ‘withdrawal of accommodation’ was maintained.
• The GDP growth forecast for FY25 was retained at 7%, with quarterly projections of 7.1% in Q1, 6.9% in Q2, 7% in Q3, and 7% in Q4.
• The CPI inflation forecast for FY25 was set at 4.5%, with quarterly projections of 4.9% in Q1, 3.8% in Q2, 4.6% in Q3, and 4.5% in Q4.

Other Developments and Initiatives

Alongside the policy measures and forecasts, the RBI also announced various non-policy measures and initiatives:

• A scheme for trading of sovereign green bonds at the International Financial Services Centre (IFSC) will be introduced.
• A mobile app will be launched to provide access to RBI’s retail direct scheme for participation in the government securities (G-sec) market.
• A draft circular for the liquidity coverage ratio (LCR) framework for banks will be issued shortly.
• All small finance banks will be enabled to deal in rupee interest rate derivative products.
• UPI (Unified Payments Interface) access will be provided for cash deposit facility and prepaid payment instruments (PPIs) through third-party applications.
• Distribution of Central Bank Digital Currencies (CBDCs) will be facilitated through non-bank payment system operators.

Outlook and Conclusion

The RBI’s monetary policy for FY25 reflects a cautious approach, with the key policy repo rate being kept unchanged to support economic stability. The GDP growth projection of 7% indicates a positive outlook for the Indian economy, although it is slightly lower than the previous fiscal year. The inflation forecast of 4.5% suggests a controlled level of price rise. The non-policy measures and initiatives announced by the RBI aim to enhance financial market efficiency and promote digital payments.

Overall, the RBI’s monetary policy decisions and forecasts for FY25 provide a stable foundation for economic growth and inflation management. It is important for businesses and individuals to stay informed about these developments and adapt their strategies accordingly.