MPC to maintain accommodative stance at least in the next two reviews

The disconcertingly sharp new wave of Covid-19 cases has reignited uncertainty regarding the economic outlook in the immediate term

In February 2021, the Government of India (GoI) had unveiled the Union Budget for fiscal 2021-2 (FY22), which targeted a growth-boosting expansion in capital spending for the upcoming fiscal. The latest available consumer price inflation (CPI) prints had shown a sharp correction to 4.6 per cent in December 2020. Moreover, we were sanguine that the worst of the Covid-19 pandemic was firmly behind us.

This was the backdrop at the time of the Monetary Policy Committee’s (MPC’s) final scheduled review for FY21, which was the last meeting before the review of the inflation-targeting framework by the GoI.
 

At that meeting, the