The MPC maintained the repo rate  at 6.5% for the seventh consecutive time in a row. 

Key highlights:

  • The RBI projects India’s real Gross Domestic Product (GDP) growth to be 7% for FY25.
  • Consumer Price Index (CPI) inflation softened to 5.1% during January-February 2024 from 5.7% in December.
  • RBI projects CPI inflation for 2024-25 at 4.5%, with quarter-wise projections.
  • Despite this moderation, food inflation increased to 7.8% in February, primarily driven by vegetables, eggs, meat, and fish.
  • Core inflation (CPI excluding food and fuel) disinflation took it down to 3.4% in February, one of the lowest in the current CPI series.
  • Domestic economic activity remains resilient, backed by strong investment demand and upbeat business and consumer sentiments.
  • Headline inflation has come off the December peak; however, food price pressures interrupt the ongoing disinflation process.

Why RBI Maintaining Unchanged Repo Rate:

  • The decision to maintain the repo rate unchanged at 6.50% by the RBI is based on an assessment of inflationary pressures, economic growth prospects, and the need for policy consistency to achieve the dual objectives of price stability and economic growth.
  • The RBI aims to ensure that inflation progressively aligns with the target while supporting growth.
  • This unchanged repo rate supports economic activity by keeping borrowing costs stable.
  • The decision reflects the need for sustained disinflation until inflation reaches the 4% target on a durable basis.

Impact of Sustained High Repo Rate:

Keeping the repo rate high can have both positive and negative consequences:

• Positives:

  • Controlling Inflation: High rates help curb inflation by making borrowing more expensive, incentivizing savings, and reducing money supply.
  • Currency Stability: High rates can attract foreign capital inflows, stabilizing the exchange rate and supporting the rupee.

• Negatives:

  • Slowed Economic Growth: High borrowing costs can discourage investments and consumer spending, leading to slower economic growth.
  • Increased Loan Burden: Businesses and individuals with existing loans might face higher interest payments, impacting their financial health.
  • Reduced Credit Availability: Banks might become more cautious in lending, hindering credit flow to key sectors like infrastructure and real estate.

Monetary policy committee (MPC):

• Established in 2016 under the amended RBI Act, 1934.

• It has six members:

  • Governor of the RBI (ex officio Chairperson)
  • Deputy Governor in charge of monetary policy
  • One other RBI Executive Director
  • Three external members appointed by the Government of India


  • The primary function of the MPC is to determine the benchmark interest rate, also known as the repo rate.
  • The repo rate influences the cost of borrowing for banks and indirectly impacts lending rates to businesses and individuals.
  • The MPC meets at least four times a year to review the monetary policy stance and decide on adjustments to the repo rate.


  • Inflation Targeting: The MPC is mandated to maintain inflation within a target range set by the government. This helps ensure price stability and protects the value of the rupee.
  • Transparency and Accountability: The MPC’s decisions are based on data-driven analysis and are made public, fostering transparency in monetary policy formulation.

Monetary Policy:

The use of interest rates and other tools by a central bank (like the RBI) to influence the money supply, economic activity, and inflation.


  • Repo Rate: The repo rate, or repurchase agreement rate, is the interest rate at which the central bank lends money to commercial banks against the collateral of government securities.
  • Reverse Repo Rate: The reverse repo rate is the interest rate at which the central bank borrows money from commercial banks by selling securities with the agreement to repurchase them in the future.
  • Open Market Operations (OMO): Open market operations refer to the buying and selling of government securities by the central bank in the open market to regulate the money supply in the economy.
  • Cash Reserve Ratio (CRR): Cash reserve ratio is the percentage of bank deposits that commercial banks are required to keep as reserves with the central bank in the form of cash.
  • Statutory Liquidity Ratio (SLR): Statutory liquidity ratio is the percentage of net demand and time liabilities (deposits) that banks are required to maintain as liquid assets in the form of cash, gold, or government-approved securities.


  • Price Stability: Maintain low and stable inflation to protect the purchasing power of the currency.
  • Economic Growth: Promote sustainable economic growth and employment.
  • Financial Stability: Ensure the smooth functioning of the financial system.

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