RBI Keeps Lending Rate Unchanged At 6.5%, GDP Estimate Hiked To 7%

New Delhi: The Reserve Bank of India monetary policy committee (MCP) has decided to keep the policy repo rate unchanged at 6.5 per cent, governor Shaktikanta Das announced on Friday and attributed it to declining inflation.

The repo rate is the rate of interest at which RBI lends to other banks.

The October consumer price index (CPI) came at a four-month low of 4.87 per cent against 5.02 per cent the previous month. “…CPI inflation is projected at 5.4% for the current year 2023-24, with Q3 at 5.6% and Q4 at 5.2%. CPI inflation for Q1 of 2024-25 is projected at 5.2%, Q2 at 4% and Q3 at 4.7%. The risks are evenly balanced,” he further said.

Das said the MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.

The committee also raised the GDP growth projection for the current fiscal to 7 per cent from 6.5 per cent on buoyant domestic demand and higher capacity utilisation in the manufacturing sector. For the third quarter of the current financial year (Q3FY24), the projection has been hiked to 6.5 per cent from 6 per cent. For Q4FY24, the GDP projection has been hiked to 6 per cent from 5.7 per cent earlier. For Q1FY25, the projection has also been hiked to 6.7 per cent from 6.6 per cent earlier. In Q2FY25 and Q3FY25, the GDP projections have been kept at 6.5 per cent and 6.4 per cent, respectively.

The Indian economy grew 7.6 per cent during the July-September quarter of the current financial year 2023-24, much faster than the polled median of 6.8%. India’s GDP growth for the April-June quarter grew 7.8 per cent.

Das, however, flagged protracted geopolitical turmoil and global economic fragmentation as risks to the growth outlook.

RBI also raised the UPI payment limits for hospitals and educational institutions to Rs 5 lakh from Rs 1 lakh per transaction.