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Informist, Wednesday, Oct. 9, 2024

MUMBAI - Following are the highlights of Reserve Bank of India Governor Shaktikanta Das' address Wednesday after the fourth bi-monthly meeting of the central bank's Monetary Policy Committee:

KEY TAKEAWAYS

* Repo rate left unchanged at 6.50%

* Policy stance changed to neutral

* MSF, Bank rates remain unchanged at 6.75%, SDF rate at 6.25%

* MPC voted by 5 votes to 1 to leave repo rate unchanged at 6.50%

* MPC voted unanimously to change stance of policy to neutral

* MPC member Nagesh Kumar voted for 25 bps repo rate cut

* MPC meeting minutes to be released on Oct 23

INFLATION

* Retains FY25 CPI inflation forecast at 4.5%

* Revises Jul-Sept CPI inflation forecast to 4.1% from 4.4% earlier

* Revises Oct-Dec CPI inflation forecast to 4.8% from 4.7% earlier

* Revises Jan-Mar CPI inflation forecast to 4.2% from 4.3% earlier

* Revises Apr-Jun CPI inflation forecast to 4.3% from 4.4% earlier

* Risks to inflation forecasts are evenly balanced

* MPC stance neutral, unambiguously focused on 4% CPI aim

* Have space to focus on inflation to bring it to 4% aim

* Developments since Aug suggest further evidence of meeting CPI aim

* To remain unambiguously focussed on aligning CPI with target

* Inflation on declining path, though some distance to cover

* Headline CPI on downward trajectory

* Moderation in CPI to reverse in Sep

* CPI to remain elevated in near term due to base effects

* Sep CPI expected to see a big jump due to unfavourable base

* Sept CPI seen rising on shortfall in onion, tomato output

* Good kharif harvest, rabi season crop to pull down CPI in Jan-Mar

* CPI to moderate Jan-Mar on robust kharif sowing
* Food inflation could ease later in financial year

* Adverse weather continues to pose risk to food inflation

* Core inflation appears to have bottomed out

* Core inflation likely to remain broadly contained

* Core inflation likely subdued due to past monetary policy steps

* Inflation targeting a major structural reform

* Inflation targeting framework has matured over the years

* Flexible inflation targeting has served us well over the years

* Inflation targeting framework has proved its mettle

* Significant risks to reaching CPI aim from commodity prices

* Significant risk to inflation from weather, geopolitical factors

* Crude oil prices have become volatile in Oct

* Optimism on food inflation subject to weather related shocks

* Greater confidence in navigating last mile of disinflation

* Current inflation-growth balance created conditions for stance change

* Expected inflation-growth balance created conditions for stance change

* Current, expected CPI-growth balance made room for stance change

* See considerable divergence in food sub-groups for inflation

* Inflation horse brought to the stable

* Taken much effort to bring inflation horse back to stable

* Must keep inflation horse on tight leash so we don't lose control

GROWTH

* Retains FY25 GDP growth forecast at 7.2%

* Revises Jul-Sept GDP growth forecast to 7.0% from 7.2% earlier

* Revises Oct-Dec GDP growth forecast to 7.4% from 7.3% earlier

* Revises Jan-Mar GDP growth forecast to 7.4% from 7.2% earlier

* FY26 Apr-Jun GDP growth forecast pegged at 7.3%

* Risks to growth evenly balanced

* India's growth story remains intact

* Domestic growth has sustained momentum

* Resilient growth gives us space to focus on inflation

* Domestic growth has maintained its momentum

* MPC decided to remain watchful given prevailing circumstances

* Manufacturing sector showing signs of slowdown, services activity holding up

* Fall in core sector output in August due to high base

* Data suggests domestic economic activity continues to be resilient

* Services sector continues to grow at a strong pace

* Services exports supporting overall export growth

* Investment activity remains buoyant

* Share of investment in GDP has reached highest level since FY13

* Govt investment increasing, private investment gaining steam

* Govt spending expected to pick up pace in line with Budget estimates

* Prospects of private consumption look bright on robust farm output

* Rural demand trending upwards, urban demand holding firm

* Buoyancy in services to support urban demand

* Consumption, investment demand gaining momentum

* Sustained buoyancy in services to also boost urban demand

* Agriculture growth supported by above normal monsoons

FX, EXTERNAL SECTOR  
* CAD likely to remain at sustainable levels

* FX reserves crossed a new milestone of $700 bln

* FDI flows remain strong in FY25

* Overall, India's external sector remains resilient

* External sector remains resilient, key vulnerability signs improved

* Confident in meeting external financing dues comfortably

* Indian economy presents picture of stability, strength

* Balance between growth, inflation well poised

* Fiscal consolidation is underway

* FX reserves scaling new peaks, fiscal consolidation underway

* Not complacent amid rapidly evolving global conditions

* MPC stance change indicates preference for greater flexibility

* Apt to have more flexibility to be in sync with evolving situation

* Unambiguously want to align CPI with target while supporting growth

* Global economy has remained resilient

* Global manufacturing sector showing signs of slowdown

* Downside risks to global growth from geopolitical tensions

FINANCIAL MARKETS

* 10-year gilt yield fell in Aug-Sept on fiscal consolidation

* 10-year gilt yield softened Aug-Sept on global, domestic cues

* 10-year gilt term premium over 3-month T-bill has remained stable

* Undertook liquidity ops to ensure overnight rates near policy rate

* Transmission of rates to credit markets has been satisfactory

* Rupee's FX rate has been largely range bound so far this year

* Lower rupee volatility highlights India macro stability

FINANCIAL SECTOR

* Health parameters of Indian banks remain strong

* Closely monitoring incoming data on credit stress in few sectors

* India's financial sector remains healthy, resilient, and stable

* Banks, NBFCs must remain attentive to mule accounts, cybersecurity

* Strong NBFC growth in recent yrs bolstered fincl inclusion

* NBFCs have seen robust growth over last few years

* NBFC growth aiding credit availability in broader economy

* NBFC sector healthy, but there are some outliers

* Some NBFCS pursuing growth without risk management framework

* Some NBFCs are chasing excessive returns on their equity

* NBFCs should avoid imprudent growth at any cost

* NBFC business targets pushing credit growth, rather than demand

* High cost, high indebtedness could pose risk to NBFCs' stability

* NBFCs should review their target-based compensation structures

* Important NBFCs follow strong risk management

* Important NBFCs follow consumer protection practices

* Self correction by NBFCs desired action

* Would prefer if NBFCs practice self-regulation to reduce risks

* To float paper on capital raising for primary urban cooperative banks

* To create data repository on climate risk information system

* To create a Climate Risk Information System to bridge data gaps

* To double per transaction limit UPI 123Pay to INR 10,000

* To enhance wallet size for UPILite

End

Compiled by Vinod Bhovad

Filed by Ashish Shirke

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