The Monetary Policy Committee(MPC) on Friday decided to keep interest rates unchanged for the sixth time since May 2020. The decision was announced by RBI governor Shaktikanta Das in his interaction with the media. The committee also revised India’s GDP growth and inflation estimate for the financial year 2021-22 in view of the second wave of Covid-19 infections. Here’s a look at the key decisions taken by the MPC:
The MPC continued to maintain an accommodative stance by keeping interest rates unchanged in order to revive and sustain economic growth. Repo rate and Reverse repo rate were maintained at their previous levels, 4% and 3.35% respectively.
Economic growth estimate:
Considering the lockdown imposed by many states due to Covid-19, the MPC revised its GDP growth estimate for the fiscal year 2021-22 from 10.5% to 9.5%. According to the central bank, while the pandemic and rise in commodity prices pose a risk to growth, the increasing pace of vaccination coupled with faster reopening of the economy will be an upside. The growth estimate for the quarters in this fiscal was changed to 18.5% for Q1, 7.9% for Q2, 7.2% for Q3 and 6.6% for the final Q4.
The six-membered MPC decided to revise its estimate of CPI inflation to 5.1% for the fiscal ending in March 2022. Inflation for the month of April 2021 was observed at 4.29% which is close to MPC’s target of 4%. The committee expressed concern over rising prices of petroleum products and increased commodity prices which could affect retail inflation as well.
Among some other key decisions, a special liquidity facility worth Rs 15,000 crore was announced for ‘contact intensive sectors’. The move is designed to provide some relief to businessmen who have been badly affected by the pandemic. The central bank has now also allowed regional rural banks to issue certificate of deposit, giving them some flexibility to manage liquidity.