Concerned over the elevated inflation amid the coronavirus pandemic, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to continue the status quo on the policy repo rate. The MPC has also decided to maintain the accommodative stance.
With this decision, the repo rate stands unchanged at 4% for the third time in a row. Even the reverse repo rate is kept unchanged at 3.35% and the Marginal Standing Facility (MSF) rate at 4.25%.
“The Monetary Policy Committee (MPC) voted unanimously to keep the policy repo rate unchanged at 4 percent,” said RBI Governor Shaktikanta Das.
“MPC decided to continue with an accommodative stance of monetary policy as long as necessary, at least for the current financial year and into next year to revive growth on a durable basis and mitigate the impact of coronavirus while ensuring that inflation remains within the target,” added Das.
CPI Inflation Projected at 6.8% in Q3, 5.5% in Q4 of FY21
According to the RBI Governor, the CPI inflation is projected at 6.8% in the third quarter (Q3) and 5.8% in the fourth quarter (Q4) of the fiscal year 2020/21.
“The MPC was of the view that inflation is likely to remain elevated with some relief in the winter months from prices of perishables and bumper Kharif arrivals,” said Das.
Real GDP Projected at -7.5% for FY21
The RBI has projected the real Gross Domestic Product (GDP) growth for the fiscal year 2020/21 at -7.5%, up from the -9.5% projected in an earlier meeting. The Central Bank has also estimated the GDP growth at 0.1% for Q4 and 0.7% for Q4.
“We are projecting GDP growth for Q3 at +0.1 percent and +0.7 percent for Q4. The real GDP growth for 2021 is projected at minus 7.5 percent. The recovery in rural demand is expected to strengthen further while urban demand is also gaining momentum,” said the RBI Governor.
Moreover, the RBI has also decided to allow all the banks to retain profits earned in FY 2019/20 and commercial and co-operative banks to not declare dividends for FY 2020/21.
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