RBI keeps repo rate unchanged at 4%; GDP growth for FY 2021-22 forecast to be 10.5 per cent

Reserve Bank of India (RBI) Governor Shaktikanta Das today said that the monetary policy committee voted unanimously to leave the repo rate and reverse repo rate unchanged at 4 per cent and 3.3.5 per cent, respectively.

Announcing the bi-monthly monetary policy after the three-day-long meeting of the monetary policy committee, the Governor said the committee also unanimously decided to continue with the accommodative stance as long as necessary to sustain growth and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

He further said, global growth is gradually recovering from the slowdown, but it remains uneven across countries. He however asserted that global growth is supported by ongoing vaccination drives, sustained accommodative monetary policies and further sizeable fiscal stimulus.

The marginal standing facility rate and bank rate will remain unchanged at 4.25 per cent, adding that the evolving CPI inflation trajectory is likely to be subjected to both upside and downside pressures.

Attributing to the bumper food grains production in 2020-21, he highlighted that it will result in softening of cereal prices going forward.

He said, mitigation of price pressures on key food items such as protein-based components and edible oils would also depend on supply-side measures and easing of international prices. He said, the projection of real GDP growth for 2021-22 is retained at 10.5 per cent consisting of 26.2 per cent in Q1; 8.3 per cent in Q2; 5.4 per cent in Q3; and 6.2 per cent in Q4.

He listed the factors such as speeding up of vaccination programme increasingly extended to the wider segments of the population; the gradual release of pent-up demand; and investment-enhancing and growth-supportive reform measures taken by the Government for the GDP growth.

The MPC noted that underlying inflation pressures emanate from high international commodity prices and logistics costs. Further, he said, the softening in crude prices seen in recent weeks, if it sustains, can assuage input cost pressures.

Stating that on the domestic economy, the focus must now be on containing the spread of the virus and on economic revival, he said, the key aspect of this strategy will be to strengthen the bedrock of macroeconomic stability that has anchored India's revival from the pandemic.

He underlined that public investment in key infrastructure sectors is a force multiplier with historically proven ability to revive the broader economy by directly enhancing capital stock and productivity, and by attracting private investment.

He said, rural demand remains buoyant and record agriculture production in 2020-21 bodes well for its resilience. The RBI governor further also said that urban demand has gained traction and should get a fillip with the ongoing vaccination drive.