Shaktikanta Das, governor of the Reserve Bank of India (RBI), reacts during a news conference in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
5 years ago
Dec 04, 2020
India's Monetary Policy Committee headed by Reserve Bank of India Governor Shaktikanta Das is set to announce its bi-monthly policy today, at a time when the country is in a technical recession and is also facing inflationary pressures.
“The growth impulses that have emerged augur well for the revitalisation of the India economy. Policy stimuli by the government and RBI are intended to nurture these growth sprouts to greater strength. Efforts are underway to ensure a calibrated unlocking of the economy with cognizance and caution about the virus. While we remain vigilant, we must now turn to alleviating the scars left by the pandemic and revive the economy.
The horizon has lighted up with a spate of positive news around vaccines and steady rise in recoveries. India's time has come to break free of the fetters of Covid-19 and reconfigure our destiny. We have born with fortitude and courage, the terrible havoc wrought by the pandemic.”
“We have lost lives and loved ones, but not hope. Not the conviction that we will overcome and emerge stronger.”
Elevated Inflation Constrains Policy Cuts: Shaktikanta Das
Inflation likely to remain elevated with some relief in the winter months, says RBI Governor Shaktikanta Das. The inflation spiral is being fueled by supply chain disruptions, excessive margins and indirect taxes, he added.
“This constrains monetary policy at the current juncture from using the space available, in support of growth,” he said.
Small window is available for pro-active supply management to break inflation spiral
Further efforts are necessary to mitigate supply-side driven inflation pressures
The Monetary Policy Committee once again left the repo rate unchanged at 4% while maintain an accommodative stance, “as long as necessary, at least through the current financial year and next year”, Governor Shaktikanta Das said.
The reverse repo rate also remained unchanged at 3.35%.
India’s Monetary Policy Committee, headed by Reserve Bank of India Governor Shaktikanta Das, is set to announce its bi-monthly policy today, at a time the country is in a technical recession and is facing inflationary pressures.
Das will read the announcement at 10:00 a.m., followed by a press conference at 12:00 p.m. The committee, which cut rates by 115 basis points since the Covid-19 crisis hit in March, has kept rates on hold since May. A Bloomberg poll of 29 economists showed that all expect a status quo on the repo rate.
CPI inflation was projected at 6.8% for the July-September quarter and was expected to range between 5.4% and 4.5% in the year’s second half. Price pressures, however, have not receded as quickly as anticipated. CPI inflation rose to a six-year high of 7.6% in October compared with 7.3% in September. It has remained above the MPC’s target for seven straight months.
At the same time, the Indian economy contracted 7.5% in the July-September 2020 quarter after a contraction of 23.9% in the April-June quarter. While better than estimated, the latest reading reaffirmed that India is amid a technical recession.