Against the backdrop of rising COVID-19 cases in India, RBI’s MPC maintained a status quo on rates. It now commits to remaining accommodative with open-ended guidance. This comes as necessary to sustain growth on a sustainable basis.
At the beginning of 2020, India’s V-shaped recovery forecasts were made for FY22. This follows the 2 V’s – vaccination and virus. However, better-than-anticipated progress has been made on the vaccine front. But the virus has made a strong comeback.
The six-member Monetary Policy Committee decided to keep interest rates unchanged. RBI also announced Rs 1 lakh crore in government bond purchases from the secondary market. This will help in keeping long term rates steady.
The reverse repo rate was also left unchanged at 3.35 per cent. RBI retained the GDP growth forecast of 10.5 per cent for 2021-22. RBI Governor Shaktikanta Das noted that India is now better prepared to deal with the COVID-19 outbreak.
Regarding inflation, the MPC noted that supply-side pressures could continue. This goes on despite the demand-side activity remains steady. Moreover, fuel prices have stayed worryingly high.
Das also reiterates RBI’s commitment to ensuring liquidity conditions remain adequate for India’s economic recovery.
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