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Informist, Thursday, Aug 8, 2024

MUMBAI - Following are the highlights of Reserve Bank of India Governor Shaktikanta Das' address today after the third bi-monthly meeting of the central bank's Monetary Policy Committee for 2024-25 (Apr-Mar):

KEY TAKEAWAYS

* 50th meeting of MPC

* MPC keeps repo rate unchanged at 6.50%

* MSF rate unchanged at 6.75%, SDF rate at 6.25%
* MPC voted with 4-2 majority to keep repo rate unchanged

* MPC retains 'withdrawal of accommodation' stance

* MPC stance of 'withdrawal of accommodation' disinflationary

* MPC voted with 4-2 majority to keep stance unchanged

* MPC member Varma, Goyal voted for 25 bps repo rate cut
* MPC Varma, Goyal voted for change in stance to neutral
* Good amount of convergence between mkt expectation, MPC

* MPC saw importance for monetary policy to stay the course
* Monetary policy showing divergence between jurisdictions
* Divergences emerging among global central banks' policies
* Several central banks moving towards a rate cut scenario
* Recognise challenges on monetary policy path

* Recognise challenges along the way, need to finish the job
* Policies have to be cautiously evolved
* MPC meeting minutes to be released on Aug 22

INFLATION

* Inflation broadly on declining trajectory
* Flexible inflation targetting framework has worked well
* Monetary policy must be resolute to bring CPI to 4% durably
* RBI sees FY25 CPI inflation 4.5% vs 4.5% earlier
* Jul-Sep CPI inflation seen 4.4% vs 3.8% earlier
* Oct-Dec CPI inflation seen 4.7% vs 4.6% earlier
* Jan-Mar CPI inflation seen 4.3% vs 4.5% earlier
* Apr-Jun FY26 CPI inflation seen 4.4%

* Food component of inflation remains stubborn

* See Jul-Sep inflation base effects reverse in Oct-Dec
* Policy must continue to be disinflationary
* Focussed on inflation with an aim to support growth
* Important for policy to maintain close vigil on inflation
* Controlling inflation is MPC's best contribution to growth
* Inflation receding grudgingly across major economies
* Risks to inflation are evenly balanced
* Considerable divergence between headline, core CPI
* Persistently high food inflation can spill over to core CPI
* Unanchored inflation expectations can spill over to core CPI

* Expected CPI easing Q2 due to base effect may reverse in Q3
* Steady discretionary spending in urban areas
* Food CPI contributed to 75% of rise in headline CPI May-Jun
* High inflation pressure persisted in other food items also
* High food price momentum may have continued in July
* High base effects in Jul may push down CPI in mo
* Relief in food inflation seen due to monsoon progress
* Relief in food inflation seen due to good kharif sowing
* Continuing food price shocks slowed disinflation progress Q1
* To monitor milk price revision, mobile tariff hike impact
* Our target is headline CPI, with food at 46% weightage
* Food inflation pressures can't be ignored
* Public understands inflation as food inflation, not others
* Can't, shouldn't get complacent because of core CPI fall
* High food inflation affects household inflation expectation
* Unanchored household CPI view could lead core CPI spillovers
* Overall CPI may become sticky even if food CPI recedes
* MPC can't afford to look through persistently high food CPI
* MPC may look through high food inflation if it is transitory
* MPC cannot overlook high food inflation if not transitory
* Pace of CPI moderation uneven, slow
* MPC must prevent second round effects of food inflation
* Overall inflation trajectory moderating
* Must ensure CPI falls, sustains at 4% target
* Made progress in achieving price stability
* Have more distance to cover on price stability

* Need to remain vigilant, ensure inflation moves to aim

* On inflation: Must be patient to finish the job at hand

MACROECONOMY, GROWTH
* Domestic growth holding up well
* Sees FY25 GDP growth at 7.2% versus 7.2% earlier
* Apr-Jun GDP growth seen 7.1% vs 7.3% earlier
* Jul-Sep GDP growth seen 7.2% vs 7.2% earlier
* Oct-Dec GDP growth seen 7.3% vs 7.3% earlier
* Jan-Mar GDP growth seen 7.2% vs 7.2% earlier
* Apr-Jun FY26 real GDP growth seen 7.2%
* Cut Apr-Jun GDP growth outlook on lower corp profits
* Cut Apr-Jun GDP growth outlook on slower govt spend
* Risks to growth are evenly balanced
* Growth is resilient, inflation trending downwards
* Need to be watchful of inflation, growth trajectory
* India inflation-growth trajectory moving in balanced manner
* Ensuring price stability supports sustained growth
* High growth cannot be sustained without price stability
* Global econ growth stable but expansion uneven
* Near-term outlook on global growth looks positive
* Significant challenges to medium-term global growth
* Significant challenges to global growth outlook
* Domestic econ activity continues to be resilient
* Good kharif sowing rise in reservoir levels bode well
* Steady southwest monsoon augurs well for kharif crop
* Mfg activity continues to gain ground on better local demand
* Services sector maintained buoyancy
* Svcs PMI indicates robust expansion in services
* Household consumption supporting turnaround in rural demand
* Improved agri activity brightens rural consumption outlook
* Sustained svcs activity to help urban consumption
* Visible signs of pickup in private investment
* Improved agri activity brightens rural consumption outlook
* Improved services activity aids urban consumption outlook

* Spillovers from geopolitics pose risk

* Improving global trade to aid external demand

FINANCIAL MARKETS

* Global financial markets showing volatility
* Pvt corp invest picking up steam on rise in bk credit
* Weighted avg call rate was close to middle of LAF corridor
* Term premium has remained steady in recent mos
* Transmission in credit markets ongoing
* Will continue to be nimble, flexible in liquidity ops
* Will ensure money mkt rates evolve in orderly manner
* Key for mkt players to keep in mind India macro strength
* RBI is committed to orderly evolution of fincl mkts

* CAD expected to stay within sustainable level Apr-Jun
* Buoyant svcs exports, remittance to keep CAD sustainable
* Expect CAD to be manageable in FY25
* FDI flows picked up in FY25, gross FDI up 20% Apr-May
* Net FDI flows doubled on year in Apr-May
 

FINANCIAL SECTOR  
* India's financial sector remains stable, healthy
* Global developments have implications for emerging markets

* Financial system remains resilient, gaining strength
* Emphasis can't shift away from identifying systemic risks
* Rupee remained largely range-bound so far FY25
* Banks facing challenges on funding front
* Bks must focus more on leveraging household savings
* Alternative invest avenues more attractive for retail investors
* Alternate invest modes pulling away savings from bk deposits
* Bks must attract more savings through new fincl products
* Certain segments of personal loans continue to see high growth
* Slower credit growth in sectors hit by RBI action last Nov
* Nov measures have led to moderation in credit growth
* Top-up loans growing at a brisk pace
* Regulatory guidance on loan-to-value flouted by some cos
* Some players not adhering to norms on top-up, gold loans
* Necessary bks, fincl cos build apt risk mgmt framework

* External commercial loans moderated during Apr-Jun
* FX reserves hit historical high of $675 bln as of Aug 2
* India's external sector resilient, key indicators strong
* Confident of meeting external requirements
* To create public repository of digital lending apps
* Public depository to help prevent unauthorised lending apps
* Credit information must be reported at least fortnightly
* To up UPI tax payment limit to 500,000 rupees from 100,000
* Propose to introduce facility of delegated payment in UPI
* Moot cutting cheque clearing cycle from 2 working days
* Propose to introduce continuous cheque clearing
* Aim for cheque payments to be cleared within few hours

End

Compiled by Vinod Bhovad

Filed by Tanima Banerjee

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