RBI POLICY ANNOUNCEMENT
The Monetary Policy Committee on Friday after three days meeting voted unanimously to maintain status quo, keeping the policy repo rate unchanged at 4%, while continue with ‘accommodative’ stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy.
As such the RBI’s key lending rate – the repo rate – unchanged at 4%. The reverse repo rate too has been kept unchanged at 3.35% as such MSF and Bank Rate remains unchanged at 4.25%. "The measures announced today, in conjunction with other steps taken so far, are expected to reclaim the growth trajectory from which we have slid. Looking ahead, a policy package to consolidate India’s position as vaccine capital of the world with leadership in production of pharma products can change the COVID narrative,” said RBI Governor Shaktikanta Das while presenting the June 2021 Monetary Policy statement.
Das also noted that policy support from all sides is required to regain the momentum of growth that was evident in H2FY21 and to nurture the recovery after it has taken root. "We have been on continuous vigil – through the first wave; the lull between the waves; and now the second wave. Maintaining financial stability and congenial financing conditions for all stakeholders is a commitment that we have adhered to assiduously,” said Das, adding, "We will continue to think and act out of the box, planning for the worst and hoping for the best."
On growth front, the governor noted that going forward, rural demand remains strong and the expected normal monsoon bodes well for sustaining its buoyancy, however, the increased spread of COVID infection poses risks."Urban demand has been dented by the second wave, but adoption of new COVID-compatible occupational models by businesses for an appropriate working environment may cushion the hit to economic activity, especially in manufacturing and services sectors that are not contact intensive,” the policy statement noted.
Further, the strengthening global recovery should support the export sector. And as the vaccination process gathers steam in the coming months and economic activity normalises, growth is likely to pick up quickly. As such, the MPC now projected India’s real GDP growth at 9.5% in 2021-22, consisting of 18.5% in Q1; 7.9% in Q2; 7.2% in Q3; and 6.6% in Q4:2021-22Meanwhile, inflation trajectory is likely to be shaped by uncertainties impinging on the upside and the downside, the policy statement noted.
MPC has projected India’s CPI inflation at 5.1% during 2021-22: 5.2% in Q1; 5.4% in Q2; 4.7% in Q3; and 5.3% in Q4:2021-22; with risks broadly balanced