RBI leaves rates unchanged, says economy better prepared to deal with Covid

Central bank maintains FY22 GDP forecast at 9.5 per cent and projected retail inflation to be at 5.3 per cent.

The Reserve Bank of India’s monetary policy committee (MPC) on Wednesday maintained key interest rates for a ninth straight meeting, retaining an accommodative stance amid the threat surrounding Omicron coronavirus variant.

Repo and reverse repo rates remain unchanged at 4 per cent and 3.35 per cent, respectively, said RBI governor Shaktikanta Das in a statement after a three-day meeting of the committee in Mumbai.

The central bank maintained its FY22 GDP forecast at 9.5 per cent and projected retail inflation to be at 5.3 per cent.

"Indian economy hauled itself out of its deepest contraction; we are better prepared to deal with Covid-19,” said Das.

"Given the slack in the economy and the ongoing catching up of activity, especially of private consumption, which is still below its pre-pandemic levels, continued policy support is warranted for a durable and broad-based recovery," he said.

"Based on an assessment of the macroeconomic situation and outlook, the MPC voted unanimously to maintain the status quo with regard to the policy repo rate and by a majority of these 5-1 to retain the accommodative policy stance." 

India's economy expanded 8.4 per cent in the September quarter from a year earlier, the fastest pace among major economies, but economists said disruptions from the new virus variant risked slowing the recovery.

Inflation has been within the RBI's 2-6 per cent target range due to the cuts in taxes on fuel by central and local governments, but the damage to perishable food items due to unseasonal heavy rains and telecom price hikes are likely to push inflation up yet again.

A Business Standard poll of 16 economists and bond market experts expected the committee to continue a status quo policy on the repo rate at 4 per cent, and the stance “accommodative”.

India reported 6,822 new cases of Covid-19 on Tuesday, marking the slowest rise in daily infections in more than 18 months. The country had till Monday detected 23 cases of Omicron, a variant that was discovered in South Africa and is being studied to learn if it causes milder or more severe illness and how much it might evade immunity from past Covid-19 illness or vaccines.

(With inputs from agencies)