RBI keeps repo rate unchanged, sees FY22 real GDP growth at 9.5%

Economic activity has evolved broadly along expected lines: Shaktikanta Das

The Reserve Bank of India’s monetary policy committee on Friday kept the key interest rates unchanged for a seventh straight meeting, while retaining an accommodative stance to help revive the economy amid coronavirus-related stress.

The repo rate and reverse repo rate would remain unchanged at 4 per cent and 3.35 per cent, respectively, said RBI Governor Shaktikanta Das in a statement on Friday, after a three-day meeting of the committee in Mumbai.

The central bank kept its FY22 GDP forecast at 9.5 per cent and it projected retail inflation for the same period to be 5.7 per cent from 5.1 per cent earlier

"The need of the hour is not to drop our guard and to remain vigilant against any possibility of a third wave especially in the background of rising infections in certain parts of the country," Das said in a virtual address.

All members of the six-member committee voted in favour of the decision to hold rates and a 5-1 majority supported retaining the accommodative monetary policy stance.
 

The committee met amid weak indicators raising doubts about the economy’s ability to sustain a nascent recovery. Some parts of the nation where the fast-spreading delta variant was first identified are still battling a rise in Covid-19 infections, with researchers warning of an impending third wave of the pandemic.

A slew of high-frequency indicators – from purchasing managers’ surveys to mobility indicators and tax collections – indicate a rather uneven recovery from the pandemic’s second wave. Hopes that monsoon rains, which were below normal in many parts of the country in July, will pick up in the August-September period and provide a boost to rural demand, likely provided some comfort to policy makers, who are focused on reviving growth.

All 15 economists and bond market participants surveyed by Business Standard on Monday had expected the committee not to change its rates or stance.