The Reserve Bank of India (RBI) has maintained the current repo rate, leaving it unchanged at 6.5%. This decision comes alongside a revision in growth and inflation forecasts. The GDP growth expectation for 2024-25 has been lowered from 7.2% to 6.6%, which would be the slowest growth in four years. The inflation forecast has been increased, with retail inflation now expected to reach 5.7% in the third quarter, up from the previous estimate of 4.8%. However, it is expected to fall to around 4% by the second quarter of the following financial year.
The RBI has also reduced the cash reserve ratio (CRR) for banks by 0.5%, which is expected to free up Rs 1.16 lakh crore for lending. This decision was welcomed by the market, which had initially reacted negatively to the unchanged repo rate but later gained following the CRR cut. The Bank Nifty index rose by 0.30%. Although the overall market saw fluctuations during the announcement, it ended with modest gains.
Governor Shaktikanta Das, addressing the policy decision, reiterated that inflation control remains the RBI's primary objective, a point emphasised in light of repeated calls from Union ministers for a rate cut. The policy stance will remain neutral, with no immediate plans for rate reductions unless inflation trends improve.
On other matters, there was no announcement regarding Das's reappointment, even though his term is set to end in 12 months. The decision to maintain the current rates was made by the six-member Monetary Policy Committee (MPC), with four votes in favour and two against.
In terms of the currency and commodities, the Indian rupee gained slightly against the dollar, opening at Rs 84.65 before briefly dropping to Rs 84.57 after the announcement.
Gold prices rose modestly in global markets to $2,640 per ounce, and in Kerala, gold jewellery prices fell by Rs 200 to Rs 56,920 per piece. Meanwhile, crude oil remained volatile, with Brent crude fluctuating around $71.98 per barrel.
The RBI also introduced a new measure to offer agricultural loans of up to Rs 2 lakh without the need for collateral, which is expected to support farmers. Lastly, in a break from tradition, Governor Das quoted Netaji Subhash Chandra Bose instead of Mahatma Gandhi during his announcement.
