Reserve Bank projects GDP growth at 6.4% for 2023-24
2 min read . Updated: 08 Feb 2023, 11:53 AM IST
Premium- Reserve Bank of India's key repo rate was raised by 25 basis points (bps) on Wednesday as widely expected, the sixth straight increase, as core inflation remained high despite signs retail inflation has peaked.
The Reserve Bank of India (RBI) Governor Shaktikanta Das on 8 February announced the Monetary Policy statement. The MPC has projected GDP will grow at 6.4 percent in financial year 2023-24.
Also Read: RBI Monetary Policy Live Updates
RBI's key repo rate was also raised by 25 basis points (bps) on Wednesday as widely expected, the sixth straight increase, as core inflation remained high despite signs retail inflation has peaked.
The Real GDP growth for 2023-24 is projected at 6.4 percent with Q1 at 7.8%, Q2 at 6.2%, Q3 at 6% & Q4 at 5.8% :RBI Governor Shaktikanta Das.
Broad-based credit growth, improving capacity utilisation, government's thrust on capital spending and infrastructure should bolster investment activity," RBI governor Shaktikanta Das said on Wednesday while announcing the monetary policy meeting outcome.
"According to our surveys, manufacturing, services and infrastructure sector firms are optimistic about the business outlook. On the other hand, protracted geopolitical tensions, tightening global financial conditions and slowing external demand may continue as downside risks to domestic output."
The Monetary Policy Committee (MPC) of the RBI also decided to raise the repo rate, at which the RBI lends money to all commercial banks, by 25 basis points to 6.5 per cent.
Speaking on today's meet, RBI MPC announcement by Shishir Baijal, Chairman & Managing Director, Knight Frank India, “The 25bps hike in REPO rate announced by the RBI is a well-balanced approach between handling inflation and economic growth. This was expected by the industry as inflation rate has remained above the tolerance band, though it has softened in the last few months. This hike will further help moderate inflation in the economy. A 25bps hike in Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rate respectively to withdraw surplus liquidity would further support in stabilizing inflation in the economy."
“Since the beginning of the rate hike cycle, which began in May 2022, the RBI has hiked its repo rate by 250 bps. With an MCLR rate of 8.4 percent, about 60 percent of the repo rate hike, so far, has already transmitted into the lending rates. Thus, the borrowing costs have significantly increased across the product categories including the housing sector. Post today’s rate hike, borrowing costs could be expensive by another 10-15 bps, on an immediate basis."
"The RBI also shared that the GDP growth has moved upwards to 7% from the previous estimates of 6.8%. In terms of growth, India remains a bright spot while other key economies face recession risks," he said.
The Shaktikanta Das-headed Monetary Policy Committee (MPC) started its three-day meeting on February 6 amid the rate hiking spree that started in May last year to check inflation.
India's retail inflation during the month of December was at 5.72 per cent, versus 5.88 per cent in November and 6.77 per cent during October.
India's retail inflation was above RBI's six per cent target for three consecutive quarters and had managed to fall back to the RBI's comfort zone in November 2022.
Since May last year, the RBI has increased the short-term lending rate (repo rate) by 250 basis points, including today's, to contain inflation, driven mainly by external factors, especially global supply chain disruptions following the Russia-Ukraine war outbreak.
