Context: 

The 29th meeting of the Monetary Policy Committee (MPC), constituted under section 45ZB of the Reserve Bank of India Act, 1934, was held from June 2 to 4, 2021.

An overview of the news

• After the meeting of the Monetary Policy Committee, the RBI announced the monetary policy, saying that the repo rate would remain unchanged at 6.5%.
• Consumer Price Inflation eased but remains above the target.
• Continued efforts to manage liquidity and currency circulation.
• The current account deficit is expected to narrow further in the fourth quarter.
• Net inflows into non-resident deposits increased to US$ 8 billion in FY23 from US$ 3.2 billion in the previous year.
• The Indian Rupee has remained stable since January this year. Conditions are favorable to accelerate capital expenditure.

Read also:- RBI Monetary Policy Committee Meeting June 2023

Monetary Policy Committee’s Decision

• Policy repo rate remains unchanged at 6.5%.
• Standing Deposit Facility (SDF rate) remains at 6.25%.
• Marginal Standing Facilityand bank rates stand at 6.75%.

Inflation Trends in India

• Consumer Price Inflation eased during March-April 2023.
• Inflation moved into the tolerance band, declining from 6.7% in 2022-23.
• Headline inflation remains above the target and is expected to continue in 2023-24.
• Projected CPI headline inflation for 2023-24 is 5.1%, assuming a normal monsoon.

Withdrawal of Rs 2000 Note

• Decline in currency circulation and increased government spending.
• System liquidity expansion due to RBI’s market operations.
• Deposit of Rs 2000 banknotes in banks further augmented liquidity.
• So far ₹1.8 lakh crore worth ₹2,000 banknotes have come back after the central bank announced to take these out of circulation. 
• This is 50% of the total ₹3.62 lakh crore-worth notes in circulation as of March 31.

Read also:- RBI Announces Withdrawal of ₹2000 Banknotes from Circulation

Use of Monetary Policy

• Monetary Policy is the process of regulating the supply of money in an economy by the monetary authority of the country. 
• The Monetary Policy, generally, adjusts the inflation rates or interest rates to sustain the price stability and to maintain the predictable exchange rates with foreign currencies. 
• The Reserve Bank of India is the central banking authority of India, which controls the monetary policy in conjunction with the central government’s developmental agenda. 
• The Reserve Bank of India is authorized to make monetary policy under the Reserve Bank of India Act, 1934.
• Monetary policy is either contractionary or expansionary and is often seen separate from the fiscal policy which deals with taxation, spending by government, and borrowing. 
• When the total money supply is increased rapidly than normal, it is called an expansionary policy, while a slower increase or even a decrease of the same refers to a contractionary policy.

Read also:- Specialized Agencies

RBI Monetary Policy Announcement, RBI Monetary Policy Announcement