 "RBI, Reserve Bank of India")
For context, this key financial exercise impacts interest rate at which the central bank lends to commercial banks in India, which in turn affects interest rates on certain loans | (Photo: Reuters)
For context, this key financial exercise impacts the interest rate at which the central bank lends to commercial banks in India, which in turn affects the interest rates on certain loans provided to customers, thereby regulating cash flow in the market.
What to expect from the RBI monetary policy review?
Besides Das, who chairs the panel, there are five additional members on this committee, including noted economists. The team has kept the repo rate unchanged at 6.5 per cent for the previous eight policy reviews since February 2023.
A Business Standard poll earlier indicated that economic experts anticipate that the RBI will maintain this status quo for the ninth consecutive policy review. They cited ongoing inflation and food prices as factors likely influencing this decision.
How does RBI MPC function?
The committee, formed in 2016, is expected to meet at least four times a year. Their main target, as Das spoke during the last meeting, is to focus like ‘Arjuna’s eye’ to meet the inflation goals.
In India, the Centre has set an inflation target (gauged by the consumer price index) at 4 per cent (with an upper tolerance limit of 6 per cent and a lower tolerance limit of 2 per cent). To understand its importance, one must note that in June, retail inflation breached the five per cent mark to stand at a four-month high of 5.08 per cent, and food inflation was 9.36 per cent.
The target has been off track since 2019-2020 and even floated beyond the “comfort zone” of six per cent during the Covid-19 years. According to the central bank, this financial year is expected to deliver a decreased average retail inflation rate at 4.5 per cent compared to last year (5.4 per cent).
The RBI’s second key goal is to ensure economic growth. The bank expects that India’s growth will be recorded at 7.2 per cent this time. India remained the fastest growing economy globally in FY24 with real GDP growth at 8.2 per cent.
To be clear, in the May MPC meeting, two members dissented from keeping the rate unchanged, fearing that not cutting it could weigh on growth given the rise in the cost of capital.
When and where to watch the RBI MPC policy review?
Business Standard will provide extensive real-time updates and in-depth analysis of the policy review.
The monetary policy statement will be broadcast live at 10 am tomorrow, August 8, on RBI’s social media handles and Business Standard’s homepage.
The RBI Governor will also hold a press conference at 12 pm.
First Published: Aug 08 2024 | 7:01 AM IST
