RBI Monetary Policy 2024 Highlights, Repo Rate Unchanged

On 09 October 2024, The Reserve Bank of India (RBI) concluded the fourth bi-monthly RBI Monetary Policy Meeting of the FY 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 a critical one, as inflation concerns continued to persist amid global economic uncertainties. The MPC, chaired by RBI Governor Shaktikanta Das, discussed various factors influencing the economy, such as inflation, foreign portfolio investments (FPI), and foreign direct investments (FDI).

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

RBI Monetary Policy Meeting 2024

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

One of the major decisions taken during the meeting was the unanimous vote by five out of six members of the MPC in favour of keeping the repo rate unchanged at 6.50%. This decision marked the ninth consecutive meeting where the repo rate remained steady at 6.50%, signalling a cautious approach by the RBI in light of inflationary pressures. Governor Das emphasized that while core inflation remains broadly moderate, caution is necessary to prevent a resurgence. He notably remarked, “It is with a lot of effort that the inflation horse has been brought to the stable. We must be careful about opening the gate lest the horse bolts.”

Inflation Control and Economic Stability

Inflation control was a central theme of the discussions. While the RBI has managed to stabilize inflation, Governor Das highlighted the importance of remaining vigilant. Any premature actions that may trigger inflationary pressures could undo the progress made so far. As global commodity prices remain volatile, the RBI continues to monitor both domestic and international factors closely.

In terms of capital flows, the Governor shared encouraging news, stating that “Foreign Portfolio Investment (FPI) flows rebounded from the outflows of $4.2 billion witnessed in April and May, while Foreign Direct Investment (FDI) flows remained strong.” These inflows are vital for the Indian economy as they provide liquidity, support the rupee, and ensure capital availability for growth.

Cautious about Consumer Interest

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

What is Monetary Policy?

Monetary policy pertains to the strategy adopted by the central bank concerning the utilization of monetary tools at its disposal to accomplish the objectives outlined in the legislation. The primary goal of the RBI’s monetary policy is to uphold price stability while also taking into account the aim of promoting economic growth.

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

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

Monetary Policy Committee

Under Section 45ZB of the revised RBI Act, 1934, the central government has the authority to form a six-member MPC tasked with determining 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 elevated level of inflation in the nation.

Members of the Monetary Policy Committee

MPC consists of six members, the governor of RBI is the Chairperson of MPC, the Deputy Governor of RBI is in charge of Monetary Policy, one member is nominated by the Board of RBI, and three members are appointed by the Central Government.

RBI Monetary Policy 2024: Key Highlights

The table below presents some key highlights of the monetary policy committee review meeting held on 09 October 2024.

Some Other Key Highlights of the MPC Meeting

Some of the key highlights of the MPC Meeting have been discussed in the given section along with the estimates of Quarterly GDP Growth.

• In the Q1 of fiscal year 2024-25, Real GDP increased by 6.7%
• For the fiscal year 2024-25, the Real GDP Growth has been projected at 7.2%
• For the fiscal year 2025-26, the Real GDP Growth has been projected at 7.3%.
• The inflation forecast has been maintained at 4.5%.
• In the Q3 of FY25, Inflation was forecasted at 4.8%.

Through the RBI Monetary Policy Meeting 2024, the quarterly GDP Growth Estimates have been provided in the below table:

Key Takeaways from the 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 inflation management while supporting growth.
• Inflation Remains a Priority: The RBI has successfully managed to keep inflation in check but remains cautious about potential risks, especially with the volatility in global commodity prices.
• FPI and FDI Flows Rebounding: The positive trend in FPI inflows after a period of outflows is a sign of renewed investor confidence in India. FDI flows are also maintaining their strength, supporting economic growth.
• Core Inflation Broadly Moderate: While core inflation remains stable, the RBI continues to stress the need for vigilance to prevent any inflationary shocks.

Some Important Terms Related to Monetary Policy

Here will understand the definition of some important tools of Monetary Policy such as the Repo Rate, SLR, SDF, CRR, etc. The table below provides some basic definitions of terms related to RBI Monetary Policy.