NEW DELHI: The Reserve Bank of India (RBI) on Friday kept its policy rates unchanged, scaled down the growth projections for the current financial year by a full percentage point, and said it would buy Rs 1.2 trillion of government securities under its own version of quantitative easing for the second quarter.
The six-member monetary policy committee (MPC) decided unanimously to keep the repo rate unchanged at 4 per cent. The stance remains “accommodative” for “as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward”.
This is in line with the RBI’s April policy decision to move to a state-based, rather than time-based, forward guidance, given the Covid-related uncertainties, report agencies.
“The MPC was of the view that at this juncture, policy support from all sides is required to regain the momentum of growth that was evident in the second half of 2020-21 and to nurture the recovery after it has taken root,” RBI Governor Shaktikanta Das said in an online address.
Das made it clear that the central bank’s focus was on reviving growth.
“We are monitoring the revival of growth, inflation dynamics,” Das said in a post-policy interaction with the media.
“Last year we had a contraction of our economy by 7.3 per cent and this year we have made a downward revision of growth so at this point of time the focus is on growth and (giving) a forward guidance with regard to accommodative stance. Hence, the focus on growth will continue and inflation, according to the MPC’s assessment, will be 5.1 per cent, which is well within the band of 2-6 per cent,” Das said.
As expected by many analysts, the central bank lowered the gross domestic product (GDP) projection, while slightly increasing the inflation forecast.
Real GDP growth is now expected at 9.5 per cent in 2021-22 -- 18.5 per cent in Q1, 7.9 per cent in Q2, 7.2 per cent in Q3, and 6.6 per cent in Q4.
The RBI in the April policy had kept its 10.5 per cent growth projection unchanged.
The central bank expects consumer price index-based inflation at 5.1 per cent for the fiscal year -- 5.2 per cent in Q1, 5.4 per cent in Q2, 4.7 per cent in Q3, and 5.3 per cent in Q4, “with risks broadly balanced”.
In the April policy, the RBI had guided inflation would be 4.4 per cent in Q3 and 5.1 per cent in Q4.