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.
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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.
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