India Monetary Policy August 2023

India: Reserve Bank of India stands pat for third time in a row in August

On 10 August, the Reserve Bank of India (RBI) left the repo rate unchanged at 6.50%, as expected by the market. It also left its standing deposit facility and marginal standing facility rates unchanged at 6.25% and 6.75%, respectively. All board members voted for the decision.

The RBI also opted to keep its policy stance focused on the “withdrawal of accommodation”, as had also been anticipated by the market. The RBI raised its inflation forecast for the current fiscal year by 0.3 percentage points to 5.4%, following the recent spike in inflation in June and July caused by soaring vegetable prices. The emergence of El Niño also likely pushed the RBI to retain its hawkish stance; the weather pattern tends to disrupt the monsoon, leading to sudden changes in rainfall and hurting agricultural output in the process. Our panel is evenly split between those expecting the RBI to leave its policy rate unchanged for the rest of the current fiscal year (April 2023–March 2024) and those expecting the RBI to cut its policy rate.

The next monetary policy meeting is scheduled to take place on 4–6 October.

Analysts at Nomura commented on the outlook:

“We expect a pivot to rate cuts in early 2024 […]. Headline inflation in India has historically converged towards core inflation […]. While there is uncertainty on the magnitude and duration of the food price shock—we expect a 3-6 month impact—once the food price shock fades, headline inflation will likely begin to converge towards core. We expect this process to begin after December.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest