The Reserve Bank of India’s Monetary Policy Committee on Friday left the benchmark repo rate unchanged at 4 per cent and also maintained its accommodative stance as it looks to continue focusing on lifting the economy ravaged by COVID-19. Inflation has fallen below the central bank’s upper tolerance band of 6 per cent.
“The MPC voted unanimously to leave the policy repo rate unchanged at 4 per cent. It also unanimously decided to continue with the accommodative stance of the monetary policy as long as necessary, at least through the current financial year and into the next year to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within the target going forward,” RBI Governor Shaktikanta Das said in his address.
The bank rate remains unchanged at 4.25 per cent and the reverse repo rate also stands unchanged at 3.35 per cent.
Retail inflation eased to 4.59 per cent in December, close to RBI’s medium term target of 4 per cent and well within the range of 2 per cent to 6 per cent, which should give comfort to the central bank.
“Given that inflation has returned within the tolerance band, the MPC judged that the need of the hour is to continue to support growth, assuage the impact of COVID-19 and return the economy to a higher growth trajectory,” said Das.
The MPC expects inflation in the current January-March quarter to be around 5 2 per cent, and sees it in the 5.2 per cent-to-5.0 per cent range in the first half of the next financial year. It has also projected inflation at 4.3 per cent for the third quarter of 2021-22.
“The outlook on growth has improved significantly with positive growth impulses becoming more broad based and the rollout of the vaccination programme in the country auguring well for the end of the pandemic,” Das said.
The central bank expects India’s GDP to grow at 10.5 per cent in 2021-22.
In another major announcement, RBI has said that retail investors will be provided online access to the government securities market, primary as well as secondary. This will be done directly through opening an account with the Reserve Bank and is a major structural reform, placing India among select few countries that have similar facilities.
“This will broaden the investor base and provide retail investors with enhanced access to participate in the government securities market,” said Das.
The RBI will also constitute an expert committee to provide a medium-term road map for strengthening the urban cooperative banking sector. Constitution of this expert committee and the terms of reference are to be announced shortly.
