The monetary policy meeting and discussions was held by the Reserve Bank of India (RBI), in the month of August. Certain aspects were discussed and decisions were made public accordingly.Â
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Decisions of Monetary Policy Committee
The commitee met on 8th, 9th and 10th of August. After detailed deliberation on all relevant aspects, the committee came to the decision to unanimously keep the policy repo rate unchanged at 6.5 percent. Additionally, the standing deposit facility, SDF rates, stand at 6.25 percent, marginal standing facility, MSF rate, as well as the bank rate stands at 6.75 percent.
The decision was finalized with a majority votes, 5 out of 6 votes of the Monetary Policy Committee. It is to ensure that the inflation aligns with the target, while supporting growth. Inline with this, the RBI has suggested banks to set aside some more amount of cash in the form of cash reserve ratio, to ensure that extra liquidity does not push up prices further. Â
India and the global growth
Global growth is likely to remain low in the current year, as well as in the coming next few years, on the basis of historical standards. WTO projected, that World Merchandise trade volume growth is likely to decelerate from 2.5 percent in 2022, to 1.7 percent in 2024. Inflation headlines staying uneven across many countries.
Despite the momentum and uncertain external obstacles, creating an impact on various economies all over the globe, comparatively, India is seemingly able to withstand the momentum against external activity, far better than other economies.Â
On the positive aspect, taking into notice the supply side, crop sowing has acquired a steady growth in the Southwest Monsoon. However, the distribution and density of rainfall are seemingly uncertain and uneven. Industrial activity is at stable level, as evident from the latestvdata on index of Industrial production. Aggregate demand conditions continue to be at strength.Â
Causes of the Decisions by the committee
Headline inflation, touched a low of 4.2 percent in May 2024, rose in June and is expected to surge in July-August, in context to vegetable prices. As the vegetable prices shoot up quickly, they need to be watched closely, with possibilities of El Nino weather conditions along with variating global food prices.
The undertaking of 250 basis points by the committee has been working well in the economy so far. It has made a commitment to of aligning the inflation level to the target of 4 percent. Eventhough, the monetary policy transmissions is still underway, the headline inflation continued to stay higher than the 4 percent and hence, the MPC decided to keep the repo rates unchanged, and to ensure that, it will put firm focus on withdrawal of the accommodations.Â
Achievements and milestones India has bagged
The Governor of RBI, Shaktikanta Das stated that the economy of India is proudly enhancing strength and stability, despite the massive economical shocks in the recent years. Our economy has continued to grow at a reasonable pace, becoming the 5th largest economy in the world, with cotiribution of nearly 15%, to the global growth.
Economy has also made significant control over Inflation. The banks remain the healthiest in the more than decades, with historical high level of capital,declining level of non performing assets and rising profitability.Â
Corporate balance sheets have robust with lower leverage improving debt servicing capacity and strong profitability.