RBI to Decide on Repo Rate After Lok Sabha Election Results

Maharanee Kumari
RBI to Decide on Repo Rate After Lok Sabha Election Results
RBI to Decide on Repo Rate After Lok Sabha Election Results

Upcoming decision on the repo rate by the RBI after the 18th Lok Sabha election results.

The results of the elections for the 18th Lok Sabha in India will be declared on June 4, 2024. Just a day after that, from June 5, 2024, a three-day meeting of the Monetary Policy Committee (MPC) under the Reserve Bank of India (RBI) will commence to decide the repo rate in the country. The decision on whether the RBI will make changes to the common man's loan rate will be announced on June 7.

It is widely expected that due to inflation and geopolitical tensions, the RBI will maintain the current repo rate.

No Change in Repo Rate Since February 2023

According to media reports, geopolitical tensions have been driving inflation higher globally, including in India. In this challenging environment, the RBI aims to keep inflation between 4 and 4.5 percent. The central bank has not made any changes to the repo rate since February 2023. Any adjustment to the rate during the upcoming MPC meeting could impact both retail and wholesale inflation. If the repo rate remains unchanged on June 7, it will be the eighth consecutive time the status quo is maintained.

Inflation a Matter of Concern

Bank of Baroda Chief Economist Madan Sabnavis noted that economic conditions have largely remained unchanged since the last policy. High-frequency indicators like PMI and GST collections indicate that economic growth is on track. However, concerns over inflation persist, particularly due to the impact of heat on vegetable prices.

No Change in Repo Rate Expected

Sanjay Nair, president of industry body ASSOCHAM, expressed the expectation that the repo rate will remain unchanged in the upcoming MPC meeting due to retail inflation being above the target of 4 percent. Although inflation is starting to decline, a clearer macroeconomic picture will emerge after the monsoon session ends in September.

ICRA Chief Economist Aditi Nair added that recent inflation data and food price forecasts suggest that the status quo will be maintained. She stated that Gross Domestic Product (GDP) data supports this expectation.