The central bank retained the repo rate at their record low of 4 per cent and the reverse repo rate at 3.35 per cent. All six members of the Monetary Policy Committee voted to leave the policy rate unchanged including the RBI Governor Shaktikanta Das.
“Bumper kharif crop, rising rabi sowing are indicative of stable food inflation. Outlook on growth has improved significantly. Need of the hour is to continue to support growth. Objective to return the economy to a higher growth trajectory,” said Shaktikanta Das, Governor, RBI.
Das emphasised signs of recovery have strengthened further with the list of normalising sectors expanding. The MPC maintained that it will keep its policy stance accommodative as long as necessary.
Economists had expected the MPC to maintain repo rate and reverse repo rate at their current level as the panel’s ability to provide more impetus to an economy that will see its first GDP contraction in 40 years in 2020-21 due to high CPI inflation levels.
While retail inflation sharply moderated in December to 4.59 per cent, much below economists’ expectations, from 6.93 per cent in November. It still remains above the central bank’s medium-term target of 4 per cent.
GDP to grow 10.5% in FY22
The RBI said India’s GDP growth rate is likely to be at 10.5 per cent in FY21-22.
“Budget has provided strong impetus for revival of health, infra sectors. Budget will reinvigorate domestic demand. The Atmanirbhar stimulus given earlier has started working its way through. Projected increase in capex by govt augurs well for investment demand, improving credibility of quality of spending,” said Das.
He also outlined that electricity demand reflects broader normalisation of economic activity than in December. Vaccination drive will provide an impetus to the restoration of contact intensive sectors.
