The Monetary Policy Committee (MPC) meeting of the Reserve Bank of India (RBI) commenced on April 3rd. This three-day meeting marks the first MPC meeting of the financial year 2024-25. The decisions will be announced on April 5th at 10 am, chaired by RBI Governor Shaktikanta Das. Several crucial economic issues will be discussed during this period, including inflation, repo rate, GDP, and liquidity.
Inflation Concerns
The Consumer Price Index (CPI)-based inflation has dropped to 5.09% in February, hovering around RBI’s target. In January, the inflation rate was recorded at 5.10%. This could be a significant agenda for discussion in the RBI MPC meeting. The government has instructed the RBI to maintain inflation at 4% for the fiscal year 2024-25. Estimated CPI inflation for the quarters of the fiscal year is 4.5% for the first quarter, 4% for the second quarter, 4.6% for the third quarter, and 4.7% for the fourth quarter. Important decisions may be made during the meeting to address inflationary pressures.
GDP and Liquidity
Following the monetary policy meeting in February, there has been a decline in liquidity. This presents a challenge for the RBI. Additionally, India’s GDP grew at a rate of 8.4% in the October-December quarter of the fiscal year 2024, surpassing RBI’s estimates.
Repo Rate Outlook
It is anticipated that the RBI may maintain status quo on repo rates to achieve its inflation targets. The current repo rate stands at 6.5%. In the past, the MPC has consistently decided to keep rates unchanged. However, there was a 25 basis points increase in rates in February 2023.
The outcome of the RBI MPC meeting will have significant implications for India’s economic policies and financial markets.