Anticipate Growth: Key Highlights to Look for in RBI Policy Announcement 2024 | Have a Look on Crucial Insights During MPC Meeting.

The Reserve Bank of India’s Monetary Policy Committee (MPC) recently met for three days to make decisions about the country’s financial policies. This is the final meeting for the financial year 2024 and the first of the year 2024. The committee is expected to maintain the repo rate at 6.5 percent, where it has been for the previous six periods. This choice is being taken in an effort to support the goal of maintaining a 4 percent inflation rate and stable consumer prices.

RBI Policy Announcement:

The Monetary Policy Committee (MPC) might not change the repo rate, keeping it at 6.5% this week. However, they might change their approach to managing money, moving from a plan of reducing support to a more neutral stance. This is because the economy is showing some signs of slowing down, and the government is cutting spending quickly.

But for now, they probably won’t talk about when or how they might lower interest rates. It might still be a while before they do that. The RBI is focused on keeping consumer prices stable at 4%, so they’re not rushing to cut rates. However, people will be paying close attention to what the RBI says about managing the flow of money in the market.

RBI Policy:— Key Highlights

Nuvama mentions several sources for their projection, they are as follows:

1. The basic cost of living is at a comfortable level, less than 4%.
2. People aren’t spending much money, and businesses aren’t making a lot either.
3. The government’s spending will slow down a lot next year, according to the budget.

They think the RBI will say it’s going to stop making things stricter, like the US Fed. But they don’t think the RBI will say it’s going to lower interest rates soon. Food prices are still high, and the US Fed hasn’t changed its plan yet. People will pay close attention to what the RBI says about managing money.

Similar to the interim budget, the RBI policy is anticipated to be uneventful; however, there are five patterns that will be attentively monitored:

1. Economic Growth: According to LKP Securities Research Analyst Ajit Kabi, the GDP will expand by 7.3%. Strong investment growth, which is predicted to climb by 10.3%, will power this expansion. In FY24, industrial growth is expected to increase by 7.9%, up from 4.4% in the previous year.The slower increase of consumer spending, which accounts for half of GDP, is a cause for concern. The below-average rainfall is posing issues for the agriculture sector as well. All things considered, real GDP figures are predicted to stay high. Based on the better economic outlook, Kabi thinks the RBI would probably increase its growth estimate for FY24 to 7.3%.
2. Inflation: Kabi stated that the cost of food items such as pulses, beans, and spices increased, accounting for the majority of the 5.7% overall price increase in December. Core inflation, or the basic cost of living, continued to hover around 4%.Policymakers, particularly the governor of the Reserve Bank of India, are concerned about the rising prices and want to see the basic cost of living return to the 4% target. The fact that not enough crops were sown throughout the winter is cause for concern. However, the basic cost of living has been declining gradually, with December seeing the lowest level since COVID began at less than 4%.
3. Liquidity Management: The RBI is expected to focus on managing the quantity of money on hand at the upcoming MPC meeting, particularly given the tight money market. The repo rate, which is determined by the RBI, is lower than the call money rate, which banks use to lend to one another.Given how tight the money market has been, the RBI is probably going to continue concentrating on regulating the amount of money on hand during the upcoming meeting. The repo rate set by the RBI has historically lagged behind the call money rate that banks use to lend to one another.
4. Domestic Demand: Nuvama says that rural areas haven’t seen much improvement in demand, and several signs like sales of trucks, electricity production, fuel use, government spending, and how much businesses make have slowed down. Also, the new budget shows that the government plans to spend much less next year. Around the world, big banks are saying they won’t make money tighter, but it’s not clear when or how fast they’ll make borrowing cheaper.
5. External Situation: According to a recent report by CareEdge, the situation outside the country looks good, with trade deficits getting smaller and strong foreign currency reserves. In December, the difference between goods imported and exported was the smallest it had been in five months, at $19.8 billion. Estimates suggest that the total amount of money going out compared to coming in for the whole year will be modest, at around 1.2% of the country’s total economic output. Foreign investors have put a total of $28.7 billion into the country’s financial markets over the past year.

In the end, the economic outlook appears promising. In the future, overall inflation is anticipated to decline with stable core and wholesale inflation, particularly as the Rabi harvests become more plentiful.

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