India's RBI keeps repo rate unchanged at 6.5%, projects 6.5% growth

The central bank also retained fiscal 2023-24 (FY24) gross domestic product (GDP) growth forecast at 6.5 per cent, with Q1 at 8 per cent, Q2 at 6.5 per cent, Q3 at 6 per cent and Q4 at 5.7 per cent.

It expects FY24 consumer price index (CPI)-based inflation to be at 5.1 per cent.

The standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the bank rate stays at 6.75 per cent.

These decisions are in consonance with the objective of achieving the medium-term target for CPI inflation of 4 per cent within a band of plus or minus 2 per cent, while supporting growth, RBI said in a release.

Domestic economic activity remains resilient in the first quarter (Q1) of the current fiscal, RBI noted. Purchasing managers’ indices (PMI) for manufacturing and services indicated sustained expansion, with the manufacturing PMI at a 31-month high in May.

Crude oil prices have eased but the outlook remains uncertain, RBI said. According to the early results from RBI surveys, manufacturing, services and infrastructure firms polled expect input costs and output prices to harden.

Assuming a normal monsoon, CPI inflation is projected at 5.1 per cent for 2023-24, with Q1 at 4.6 per cent, Q2 at 5.2 per cent, Q3 at 5.4 per cent and Q4 at 5.2 per cent, RBI said.

The government’s thrust on capital expenditure, moderation in commodity prices and robust credit growth are expected to nurture investment activity.

Weak external demand, geo-economic fragmentation and protracted geopolitical tensions, however, pose risks to the outlook, it noted.

Fibre2Fashion News Desk (DS)