The Reserve Bank kept the repo rate unchanged at 4 per cent and retained the GDP growth target at 9.5 per cent as the country was “in a much better position compared to June 2021”. The RBI Governor Shaktikanta Das made the announcement at the end of the bi-monthly Monetary Policy Committee (MPC) review meeting. The central bank also decided to maintain an “accommodative” stance as the economy is yet to recover from impact of second Covid wave. The reverse repo rate has been left untouched at 3.35 per cent.
“The need of the hour is not to drop our guard and to remain vigilant against any possibility of a third wave especially in the background of rising infections in certain parts of the country,” Shaktikanta Das asserted in his virtual address.
With today’s decision, the RBI has kept the key benchmark rates unchanged for the seventh time. The central bank last cut its policy rates on May 22, 2020, in an off-policy cycle when the covid-19 pandemic first shook the country.
RBI’s GDP estimates came at a time while various agencies have already reduced their GDP forecast for India amid looming concerns over a possible third wave. Last month, the International Monetary Fund (IMF) sharply cut its 2021-22 economic growth forecast for India by 300 basis points to 9.5 per cent. In its April review, the multilateral agency had pegged India’s economic growth for FY22 at 12.5 per cent.
RBI’s GDP estimates come at a time when there has been a downward revision in the GDP forecast for India amid concerns over a possible third wave. Last week, the International Monetary Fund (IMF) lowered India’s growth projection from 12.5 per cent to 9.5 per cent for fiscal 2021-22 – down by three percentage points.
In the previous monetary policy review on June 4, the RBI had cut its estimates for GDP growth for the current fiscal to 9.5 per cent from the earlier 10.5 per cent.
All 61 economists polled by Reuters late last month had said they see no change in the repo rate which has been steady at 4 per cent since May last year.
The banking regulator highlighted that economic activity has started normalising and private consumption is witnessing an improvement. “We are in a much better position compared to June 2021..Need to remain vigilant on possibility of a third wave,” the Governor said.
The Reserve Bank has slashed its key lending rates i.e. repo rate by 115 basis points since March 2020 to cushion the economy from the aftershock of coronavirus.
Meanwhile, the RBI has projected CPI inflation at 5.7 per cent during 2021-22, consisting of 5.9 per cent in the second quarter, 5.3 per cent in the third quarter and 5.8 per cent in the fourth quarter of 2021-22. The CPI inflation for the first quarter of 2022-23 has been projected at 5.1 per cent.
With inputs from NDTV
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