Let’s quickly go through the main points of the RBI’s latest Monetary Policy Committee (MPC) meeting. Think of this like the strategy your school team comes up with before a big match, guiding how we can move ahead financially.
Repo Rate: The MPC has decided to keep the repo rate (the rate at which RBI lends money to commercial banks) steady at 6.5%. This means the cost of borrowing from banks isn’t going to change anytime soon. If you were thinking of taking a loan, this might be a good time.
Economic Growth (GDP): The RBI expects the Indian economy to grow at 6.5% for FY24. Growth is expected to be the highest (8%) in the first quarter and slow down to 5.7% by the last quarter. But do remember, some slowdown is expected due to global geopolitical tensions.
Inflation: Prices are expected to rise a bit faster than the RBI’s comfort level (4%). It’s like when you want to spend Rs 100 on a toy, but it suddenly costs Rs 104, and that’s annoying! It is, however, a tiny bit better than the last prediction of 5.2%. Let’s hope the RBI can do more to slow the price increases.
Current Account Deficit (CAD): The CAD, which is the difference between the money flowing in and out of the country, should be manageable. That’s like saying, even if we spend more than we earn this year, we’ve saved enough pocket money to cover it.
Foreign Exchange (Forex): India’s ‘savings account’ of foreign currency stands at a whopping $595.1 billion, and our Indian Rupee has been pretty stable. Plus, our economy is getting stronger, which is like saying our school team has been practicing hard and is performing well.
Liquidity: This is all about how much money is available for banks to lend. The governor says there is enough money going around, which could increase even more as people deposit their Rs 2,000 notes in banks. Also, money coming in from foreign citizens (non-resident deposits) has increased to $8 billion this year. It’s like more people are deciding to join our school team, and that’s great for us!
RuPay Forex Card and e-RUPI Vouchers: RBI is introducing new payment methods. They’ll be issuing guidelines on digital lending, like rules for a new game, to keep things running smoothly.
What does this mean for you, as an investor? Keeping the repo rate the same is a sign of stability. This could be a good time to take a loan for a new business or a home. Also, with the RBI working on digital lending, it might be a good time to look at investments in digital finance or fintech. However, with inflation expected to be slightly high, we need to keep an eye on how that might affect our savings and spending.
Let’s stay informed, and make smart money decisions!
Regards, CIO, Finogent Solutions LLP