RBI Keeps Key Rates Unchanged, Assures Ample Liquidity In System
- "Going forward, the Indian economy is poised to move in only one direction and that is upwards. It is our strong conviction, backed by forecasts, that in 2021/22, we would undo the damage that COVID-19 has inflicted on the economy," Reserve Bank of India Governor Shaktikanta Das said after announcing the rate decision.
- The Reserve Bank has slashed its key lending rate i.e. repo rate by 115 basis points since March 2020 to cushion the economy from the shock of coronavirus crisis.
- The central bank had last cut its policy rate on May 22, 2020, in an off-policy cycle, when Covid-19 posed an unprecedented challenge to the economy.
- The banking regulator has thereafter retained the repo rates - the key interest rate at which the RBI lends money to commercial banks - steady at a 19-year low of 4 per cent. The reverse repo rate - the rate at which RBI borrows from banks - is at 3.35 per cent.
- Meanwhile, Shaktikanta Das said that the RBI will maintain an accommodative stance for as long as required in order to keep economic recovery on track amid the COVID-19 crisis.
- The Monetary Policy Committee has also projected real GDP growth will be 10.5 per cent in 2021-22 – in the range of 26.2 to 8.3 per cent in the first half, and six per cent in the third quarter.
- The growth figure projected by the central bank committee is lower than the figures predicted by the International Monetary Fund (IMF) and the Economic Survey.Â
- India was hit hard by the pandemic, suffering the worst contraction in the June quarter, and the GDP is projected to contract by a record 7.7 per cent in the current fiscal ending March 31, 2021.
- Meanwhile, the RBI Governor said inflation was expected to remain within the RBI's targeted range over the next few quarters. Retail inflation declined sharply to 4.59 per cent in December 2020, the latest data showed. Retail inflation based on the Consumer Price Index (CPI) was 6.93 per cent in November.
- A pick-up in manufacturing and roll-out of the immunisation campaign has reduced some of the pessimism surrounding the economy.
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