“Economic Recovery Still Delicate, Policy Support Necessary”: RBI Governor

0
30


RBI Governor Shaktikanta Das kept the repo rate unchanged at four per cent in MPC meet

A continued policy accommodation is necessary as the economic recovery still remains delicately poised and the growth is yet to take firmer roots, with the rise of inflation less steeper than expected, Reserve Bank of India (RBI) Governor Shaktikanta Das said in the minutes of the latest monetary policy committee (MPC) meeting.

The country’s real gross domestic product (GDP) expanded by 20.1 per cent year-on-year during the first quarter of the current fiscal, driven by a large favourable base effect.

”However its momentum was dragged down by the second wave of the pandemic. The level of real GDP in Q1 was 9.2 per cent below its pre-pandemic level two years ago,” added the RBI Governor.

RBI Governor underlined that the external environment – which had been supportive of aggregate demand over the past few months, may lose momentum for several reasons such as a sudden surge in infections, persistence of Covid-related supply bottlenecks, a binding shortage of key inputs like semi-conductors, and the spike in gas prices.

”Given an ever evolving and dynamic environment, with the outlook overcast by several uncertainties including the fact that the pandemic is far from over, we need to ensure that the nascent revival of economic activity shows signs of durability and sustainability,” said RBI Governor Shaktikanta Das.

In the previous policy review meeting held in August, MPC member Jayant Varma said that the borrowing rate should be revised, and in the latest meeting, reiterated his call to raise the reverse repo rate and also, alter the accommodative monetary policy stance.

”Raising effective money market rates quickly towards four per cent would demonstrate the MPC’s commitment to the inflation target” said Mr Varma.

In its fourth bi-monthly monetary policy review for the financial year 2021-22 announced on October 8, the RBI maintained the status quo for the eighth time in a row, keeping the key lending rates steady.

The repo rate- the key interest rate at which the RBI lends money to commercial banks was kept steady at four per cent, and the borrowing rate or reverse repo rate – the rate at which the RBI borrows money from banks, was kept unchanged at 3.35 per cent. 

The central bank also retained the gross domestic product (GDP) growth projection for the current fiscal at 9.5 per cent, however, it trimmed the CPI inflation projection to 5.3 per cent from 5.7 per cent for the fiscal, on the trajectory being more favourable than expected. 



Source link