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Thursday morning, the Governor of the Reserve Bank of India Shri Shaktikanta Das, issued the Monetary Policy Statement for June. This statement helps explain the RBI assessment of the overall economy and the prevailing financial market conditions.
According to the statement released today, the Shri Shaktikanta Das stated that the Indian Economy and financial sector stands out as strong and resilient. In a world of unprecedented headwinds and swift cross-currents. Further, comparing the past three years he believes that the uncertainty on the horizon is much less and the path we are heading is somewhat clearer. Despite there being geopolitical conflicts, that still prevail and policy normalization globally is still not completed.
Labor markets across the world are tight, this is the reason why the demand is shifting from goods to services. Due to this the central across the globe are on high alert and are watchful of the evolving conditions. Despite some tempering or pausing that rate hikes.
In challenging times, the Reserve Bank of India is on the front to preserve the price and financial stability. Further ensuring that adequate flow of financial resources is maintained in the economy. This has caused the strengthening of the domestic macroeconomic fundamentals. According to the governor, “Inflation has moderated, the current account deficit has narrowed, and foreign exchange reserves are comfortable. The Indian banking system remains resilient, while the domestic financial markets have evolved in an orderly manner.”
Moving on to the decisions of the monetary policy committee. The committee met on the 6th, 7th and 8th of June, and based on the macroeconomic outlook, they decided unanimously to keep the policy repo rate unchanged at 6.5%. Similarly, the standing deposit facility (SDF rate) remains at 6.25%. While the marginal standing facility and bank rates stand at 6.75%. The MPC after the majority of 5 out of 6 decided to remain focused on the withdrawal of accommodation to ensure that inflation aligns with the target while supporting the growth.
The MPC's decision and the slight reduction in the CPI inflation prediction for 2023–2024 to 5.1 per cent both came as predicted. The RBI, meanwhile, kept its 6.5 per cent GDP growth prediction for the current year. Governor Shaktikanta Das frequently emphasized that the MPC is focused on bringing inflation to its 4 per cent objective on a sustained, rather than one-time, basis. If there is one important thing to take away from today's proceedings, it is that. The RBI still has a ways to go before succeeding in its battle against inflation.
- Charu Kapoor
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