The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Thursday, February 8, 2024 after a detailed assessment ddecided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent.
Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent.
The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.
“These decisions are in consonance with the objective of achieving the medium- term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” Mr. Das announced after the end of the three days meeting.
‘Domestic activity strengthening’
Stating that domestic economic activity was strengthening, Mr. Das said “As per the first advance estimates (FAE) released by the National Statistical Office (NSO), real gross domestic product (GDP) is expected to grow by 7.3 per cent, year-on-year (y-o-y) in 2023-24, underpinned by strong investment activity.”
On the supply side, gross value added (GVA) expanded by 6.9 per cent in 2023-24, with manufacturing and services sectors as the key drivers, he said
.Looking ahead, recovery in rabi sowing, sustained profitability in manufacturing and underlying resilience of services should support economic activity in 2024-25, he added.
Taking various factors into consideration, real GDP growth for 2024-25 is projected at 7.0 per cent with Q1 at 7.2 per cent; Q2 at 6.8 per cent; Q3 at 7.0 per cent; and Q4 at 6.9 per cent. The risks are evenly balanced.
Also taking into account various factors, CPI inflation is projected at 5.4 per cent for 2023-24 with Q4 at 5.0 per cent. Assuming a normal monsoon next year, CPI inflation for 2024-25 is projected at 4.5 per cent with Q1 at 5.0 per cent; Q2 at 4.0 per cent; Q3 at 4.6 per cent; and Q4 at 4.7 per cent. The risks are evenly balanced.
Mr. Das said the MPC noted that domestic economic activity is holding up well and is expected to be backed by the momentum in investment demand, optimistic business sentiments and rising consumer confidence.
“On the inflation front, large and repetitive food price shocks are interrupting the pace of disinflation that is led by the moderation of core inflation. Geopolitical events and their impact on supply chains, and volatility in international financial markets and commodity prices are key sources of upside risks to inflation. The cumulative effect of policy repo rate increases is still working its way through the economy,” he said.
The MPC, he said, will carefully monitor any signs of generalisation of food price pressures to non-food prices which can fritter away the gains in the easing of core inflation.
“As the path of disinflation needs to be sustained, the MPC decided to keep the policy repo rate unchanged at 6.50 per cent in this meeting. Monetary policy must continue to be actively disinflationary to ensure anchoring of inflation expectations and fuller transmission,” he added.
Industry hails RBI’s move
“The long-term benefits of owning a home have led to sustainable growth in the segment and we see this up-cycle continuing in 2024,” said Ramani Sastri, Chairman and MD, Sterling Developers.
“With economic growth, the premium housing segment too will continue to witness higher demand in the future. Real estate investments hence remain one of the most desired investments due to their strong base and reliability factor,” Mr. Sastri said.
“Going forward, there can be further uptick in demand with reduction in rates, making it even more enticing for prospective homebuyers and bolster overall market confidence,” Mr. Sastry added.
“With the RBI’s inchanged repo rate at 6.5%, homebuyers retain their advantage of relatively affordable home loan interest rate,” says Anuj Puri, Chairman, ANAROCK Group, and expected the momentum in housing sales to continue.
