Highlights of RBI Monetary Policy 2024, no change in repo rate

On October 09, 2024, the Reserve Bank of India (RBI) concluded the fourth bi-monthly RBI monetary policy meeting for the financial year 2024-25. This Monetary Policy Committee (MPC) meeting is to assess the current economic situation and take measures to manage inflation, growth and liquidity in the Indian economy. The meeting was important as inflation concerns persisted amid global economic uncertainties. The MPC, chaired by RBI Governor Shaktikanta Das, discussed various factors affecting the economy, such as inflation, foreign portfolio investment (FPI), and foreign direct investment (FDI).

The Reserve Bank of India by a 5:1 majority decided to keep the policy interest rates and its monetary stance unchanged with benchmark interest rates at 6.5%. The given article presents some key highlights of the RBI Monetary Policy Meeting 2024 and also explains some of the rules related to it.

RBI Monetary Policy Meeting 2024

The RBI Monetary Policy Meeting 2024 lasted for three days (07-09 October 2024), with the final decision announced on the concluding day of the meeting. The meeting saw in-depth discussions on economic challenges, particularly focusing on controlling inflation and maintaining economic stability.

One of the key decisions taken during the meeting was five out of six MPC members voting unanimously in favor of keeping the repo rate unchanged. 6.50%The decision is the ninth consecutive meeting where the repo rate remained stable at 6.50%, indicating RBI’s cautious stance in view of inflationary pressures. Governor Das stressed that although core inflation remains broadly moderate, caution is necessary to prevent a resurgence. He specifically commented, “With considerable effort the inflation horse has been brought to a stable position. We must be careful in opening the door, lest the horse bolt it.”

Inflation control and economic stability

Inflation control was the central topic of discussion. While the RBI has managed to stabilize inflation, Governor Das highlighted the importance of remaining cautious. Any premature action, which could increase inflationary pressures, could ruin the progress made so far. As global commodity prices remain volatile, the RBI is closely monitoring both domestic and international factors.

In terms of capital inflows, the Governor shared encouraging news, saying that “Foreign portfolio investment (FPI) inflows picked up again from the $4.2 billion outflow seen in April and May, while foreign direct investment (FDI) inflows remained strong. These flows are important for the Indian economy as they provide liquidity, support the rupee and ensure availability of capital for growth.

Vigilant about consumer interest

To prevent fraudulent activities and wrong transfers, RBI will now let people check the beneficiary’s account details before making the transfer. This feature, already available for UPI and IMPS, will also be added to NEFT and RTGS transfers.

What is monetary policy?

Monetary policy relates to the strategy adopted by the central bank with respect to the use of the monetary instruments at its disposal to pursue the objectives outlined in the law. The primary goal of RBI’s monetary policy is to maintain price stability while keeping in mind the objective of promoting economic growth.

• Ensuring price stability is an essential precondition for achieving sustainable development.

The amended RBI Act of 1934 also includes provisions for the Government of India to set an inflation target in consultation with the Reserve Bank. (4%+-2%) Once every five years.

monetary policy committee

under Section 45ZB of the amended RBI Act, 1934, The central government has the right to form six-member MPC Tasked with setting the policy interest rate necessary to meet the inflation target. The first MPC was established on 29 September 2016.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) will meet to formulate its response to the Government of India regarding the high levels of inflation in the country.

Member of the Monetary Policy Committee

The MPC consists of six members, the Governor of the RBI is the Chairman of the MPC, the Deputy Governor of the RBI is in charge of monetary policy, one member is nominated by the Board of the RBI, and three members are appointed by the Central Government. Is.

RBI Monetary Policy 2024: Highlights

The table below presents some of the highlights of the review meeting of the Monetary Policy Committee held on October 09, 2024.

Some other highlights of the MPC meeting

Some of the highlights of the MPC meeting are discussed in the section below along with quarterly GDP growth estimates.

• Real GDP grew by 6.7% in the first quarter of FY 2024-25
• Real GDP growth is estimated at 7.2% for the financial year 2024-25
• Real GDP growth for the financial year 2025-26 is estimated at 7.3%.
• Inflation estimate has been maintained at 4.5%.
• Inflation in Q3FY25 was estimated at 4.8%.

Through the RBI Monetary Policy Meeting 2024, the quarterly GDP growth projections are provided in the table below:

Key findings from RBI Monetary Policy Meeting 2024

• Repo rate unchanged at 6.50%: The repo rate has been kept at 6.50% for the ninth consecutive meeting, reflecting the RBI’s focus on managing inflation while supporting growth.
• Inflation will remain a priority: The RBI has successfully managed to keep inflation under control, but remains cautious about potential risks, especially with volatility in global commodity prices.
• FPI and FDI inflows increase again: The positive trend in FPI inflows after a period of outflows is indicative of renewed investor confidence in India. FDI inflows also maintain their strength and are supporting economic growth.
• Core inflation broadly moderate: While core inflation remains stable, the RBI is emphasizing the need for vigilance to prevent any inflationary shock.

Some important terms related to monetary policy

Here we will understand the definition of some important instruments of monetary policy like repo rate, SLR, SDF, CRR etc. The table below provides some basic definitions of terms related to RBI monetary policy.