GDP growth estimate to repo rate cut: Key takeaways from RBI MPC meeting

The Reserve Bank of India on Friday announced its latest monetary policy decisions. The new RBI Governor Sanjay Malhotra, who was chairing his first Monetary Policy Committee (MPC) meeting, announced the decision of the six-member panel.

Aligning with widespread expectations, the Governor announced 25 basis points reduction in interest rate after a gap of nearly five years. The MPC unanimously decided to slash policy rate by 25 basis points to 6.25 per cent, Malhotra said.

"MPC policy is a force of interest for many, it impacts lives of all citizens of the country. MPC resolution provides rationale and thought process of the committee," said Governor Malhotra during his statement.

Here are the key takeaways:

1. The MPC announced a 25 basis point reduction in the repo rate, lowering it to 6.25 per cent from 6.50 per cent. The SDF rate was changed to 6 per cent.

2. The fiscal deficit for FY25 has been pegged at 4.8 per cent of GDP, lower than budgeted 4.9 per cent, while for FY26 the deficit is projected at 4.2 per cent, lower than what was given in the consolidation roadmap.

3. The RBI estimates GDP growth in next fiscal year at about 6.7 per cent. Food inflation is also expected to soften with the arrival of new crops.

4. Malhotra announced that RBI will set up a working group to review trading and settlement timing of regulated markets.

5. Growth expected to recover from Q2FY25, Malhotra said.

6. RBI Governor urged banks not to passively park funds with Central bank but actively trade amongst themselves.

7. RBI forex policy has remained consistent, in favour of orderly and stable market operation, does not target any exchange rate. As on Jan 31, India's forex reserves stood at $630.6 billion, providing import cover of over 10 months.

8. On liquidity front, system liquidity did turn into deficit in December 24 and January 25.

9. RBI said the the global economic backdrop remains challenging but the Indian economy continue to remain strong, resilient. CAD expected to remain well within sustainable level.

10. Next meeting of Monetary Policy Committee scheduled for April 7-9.

(With PTI inputs)