RBI retains GDP growth target at 9.5%; keeps rates unchanged

The Reserve Bank of India (RBI) governor Shaktikanta Das on Friday, August 6, 2021, announced the August bi-monthly monetary policy statement. As expected, the RBI decided to maintain the status quo and keep the repo rate unchanged at 4 per cent for the seventh consecutive time. The reverse repo rate stands at 3.35 per cent.

The majority of economists had expected RBI's MPC to keep the key lending rate unchanged.

The Monetary Policy Committee (MPC) has also decided on a 5 to 1 majority to continue with the accommodative stance as long as necessary to revive the growth on a durable basis and to mitigate the impact of COVID-19.

The MPC has retained its GDP growth projection of 9.5 per cent for FY22 consisting of 21.4 per cent in Q1; 7.3 per cent in Q2; 6.3 per cent in Q3; and 6.1 per cent in Q4 of 2021-22. Real GDP growth for Q1:2022-23 is projected at 17.2 per cent.

The statement follows the three-day review meeting of the six-member MPC which had begun on Wednesday. The MPC, a six-member team headed by RBI governor Shaktikanta Das, is in charge of deciding the key policy rates.

In a statement, Governor Shaktikanta Das said that RBI retains the GDP growth target at 9.5 per cent in FY22 while CPI inflation can be seen at 5.7 per cent in 2021-21. He said, Economic activity has broadly evolved on the lines of the MPC's expectation in June and the economy is recovering from the setback of the second wave.

Inflationary pressures are evoking concern. But current assessment is that these pressures are transitory and largely driven by adverse supply-side factors. Continued policy support from all sides - monetary, fiscal and sectoral is needed to nurture the hesitant recovery.

After the June MPC meeting, the Reserve Bank of India had left the repo rate unchanged at 4 per cent. It was for the sixth time in a row that the MPC maintained the status quo on interest rates.