RBI lowers GDP growth projection to 9.5 pc for 2021-22

Mumbai: The Reserve Bank on Friday lowered the country's growth projection for the current financial year to 9.5 per cent from 10.5 per cent estimated earlier, amid uncertainties created by the second wave of the coronavirus pandemic.

The apex bank also projected the retail inflation at 5.1 per cent in the current financial year ending March 31, 2022.

Addressing the media after the meeting of the Monetary Policy Committee, RBI Governor Shaktikanta Das said the sudden rise in COVID-19 infections, and fatalities has impaired the near nascent recovery that was underway, but has not snuffed it out.

The impulses of growth are still alive, he said, and added that the aggregate supply conditions have shown resilience in the face of the second wave.

The RBI Governor said the RBI will "continue to think and act out of the box", planning for the worst and hoping for the best.

Das further said the measures announced on Friday, in conjunction with other steps taken so far are expected to reclaim the growth trajectory from which "we have slid".

In April, the Reserve Bank had projected the real GDP growth for 2021-22 at 10.5 per cent.

India's economy had contracted by less-than-expected 7.3 per cent in the fiscal year ended March 2021, after growth rate picked up in the fourth quarter. The gross domestic product (GDP) grew by 1.6 per cent in the January-March period, up from 0.5 per cent in the previous quarter.

"... real GDP growth is now projected at 9.5 per cent in 2021-22 consisting of 18.5 per cent in Q1; 7.9 per cent in Q2; 7.2 per cent in Q3; and 6.6 per cent in Q4 of 2021-22," the Governor said.

Presenting the second bi-monthly monetary policy review, RBI Governor Shaktikanta Das announced that key repo rate -- the short term lending rates to banks -- will be kept unchanged at 4 per cent.

The projection is well within the Monetary Policy Committee's target to keep the rate of inflation at 4 per cent with an upper or lower tolerance level of 2 per cent.

Taking into consideration the measures taken so far as well as the upside risks, Das said the CPI (Consumer Price Index) inflation is projected at 5.1 per cent during 2021-22.

This consists of 5.2 per cent in the first quarter, 5.4 per cent in the second quarter, 4.7 per cent in the third quarter and 5.3 per cent in the fourth quarter of this fiscal, with risks broadly balanced, he said.

According to Das, upside risks to inflation emanates from persistence of second COVID wave and consequent restrictions on activity on a virtually pan-India basis.

"In such a scenario, insulating prices of essential food items from supply side disruptions will necessitate active monitoring and preparedness for coordinated, calibrated and timely measures by both Centre and state governments to prevent emergence of supply side bottlenecks and increase in retail margins," the governor said.