The Monetary Policy Committee (MPC) unanimously decided to keep the policy repo rate unchanged for a third straight meeting at 6.5%. The spending deposit facility (SDF) remains at 6.25%, the marginal spending facility (MSF), CRR remains unchanged at 4.5%, and the bank rate stands at 6.75%.

The MPC, by a majority of 5 out of 6 members, remained focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.

India became the fifth-largest economy in the world, contributing around 15% to global growth.

Global growth is likely to remain low by historical standards in the current year and next few years, despite the upward revision in the global growth forecast for 2023 by the IMF. Headline inflation is easing unevenly across countries and remains above the target in major economies.

India’s headline inflation is expected to surge during July–August, led by vegetable prices. While the vegetable price shock may reverse quickly. The latest CPI inflation projections for 2023–24, assuming a normal monsoon, are revised to 5.4%, with Q2 at 6.2%, Q3 at 5.7%, and Q4 at 5.2%. CPI inflation for Q1:2024–25 is projected at 5.2%.

Taking factors into consideration like, headwinds from weak global demand, volatility in global financial markets, geopolitical tensions and geo-economics fragmentation, the real GDP growth for 2023-24 is projected at 6.5 % with Q1 at 8.0 %; Q2 at 6.5 %; Q3 at 6.0 %; and Q4 at 5.7 %, with risks broadly balanced. Real GDP growth for Q1:2024-25 is projected at 6.6 %.

Rural demand, tractor and fertiliser sales improved in June while two-wheeler sales moderated. High growth in agricultural credit and improving sales volume of major FMCG companies suggest incipient recovery in rural demand, which will be reinforced by improving kharif prospects

Capacity utilisation in the manufacturing sector at 76.3 % (and 74.1 % on seasonally adjusted basis) remained above the long-term average of 73.7 %. The total flow of resources to the commercial sector from banks and other sources taken together has increased by Rs. 7.5 lakh crore during the financial year 2023-24 so far (up to July 28) as compared with Rs. 5.7 lakh crore a year ago10.

The existing CRR remains unchanged at 4.5%. In effect from August 12, scheduled banks should maintain an incremental cash reserve ratio (I-CRR) 10% on increase in their net demand and time liabilities between May 19 and July 28. This is purely a temporary measure for managing the current liquidity.

Introducing offline payments on UPI and enhance the transaction limit for small-value digital payments in off-line mode from Rs. 200 to Rs. 500 within the overall limit of Rs. 2000 per payment instrument.