The Reserve Bank of India has opted to maintain its key interest rate unchanged, citing persistent inflation as a significant concern. The Monetary Policy Committee, consisting of three members from the central bank and an equivalent number of external members, unanimously decided to keep the benchmark repurchase rate (repo) at 6.50 percent.


The central bank also indicated its intention to uphold tight liquidity through bond sales in order to steer prices closer to the desired target. This marks the fourth consecutive meeting where the rate has remained unchanged, reaffirming their commitment to the “withdrawal of accommodation” stance.


RBI Governor Shaktikanta Das emphasised that the central bank has identified high inflation as a primary threat to macroeconomic stability and sustainable growth. He reaffirmed the bank’s unwavering dedication to aligning inflation with the 4 percent target on a sustainable basis.


As per the RBI, the main considerations underlying the decision are:

  • Global growth is losing momentum. Inflation is easing gradually but remains well above target in major economies. Concerns about higher for longer rates are imparting volatility to global financial markets. Sovereign bond yields have hardened, the US dollar has appreciated, and equity markets have corrected. Emerging market economies (EMEs) are experiencing currency depreciation and volatile capital flows.
  • Real gross domestic product (GDP) posted a growth of 7.8 per cent year-on-year (y-o-y) in Q1:2023-24 (April-June), underpinned by private consumption and investment demand.
  • South-west monsoon rainfall recovered during September and ended 6 per cent below the long period average. The acreage under kharif crops was 0.2 per cent higher than a year ago. The index of industrial production rose by 5.7 per cent in July; core industries output expanded by 12.1 per cent in August. Purchasing managers’ indices (PMIs) and other high frequency indicators of the services sector exhibited healthy expansion in August-September.
  • On the demand front, urban consumption is buoyant while rural demand is showing signs of revival. Investment activity is benefitting from public sector capex. Strong growth is seen in steel consumption, cement production as well as in imports and production of capital goods. Merchandise exports and non-oil non-gold imports remained in contraction in August, although the pace of decline eased. Services exports improved in August.
  • CPI headline inflation surged by 2.6 percentage points to 7.4 per cent in July due to a spike in vegetable prices, before moderating somewhat in August to 6.8 per cent. Fuel inflation edged up to 4.3 per cent in August. Core inflation (i.e., CPI excluding food and fuel) softened to 4.9 per cent during July-August 2023.
  • As on September 22, 2023, money supply (M3) expanded by 10.8 per cent (y-o-y) and bank credit grew by 15.3 per cent. India’s foreign exchange reserves stood at US$ 586.9 billion as on September 29, 2023.
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