New Delhi: In an unanimous vote, the Reserve Bank of India’s Monetary Policy Committee (MPC) has decided to keep key interest rates unchanged, but will continue with its accommodative stance
“as long as necessary”.
With this decision, the repo rate has been left unchanged at 4%, while the reverse repo remains at 3.35%.
The move, which was widely expected by both market experts and economists, comes amid some signs of recovery in the Indian economy, which has been hurt badly by the COVID-19 pandemic.
“By all indications, the deep contractions of Q1:2020-21 are behind us; silver linings are visible in the flattening of the active caseload curve across the country. Barring the incidence of a second wave, India stands poised to shrug off the deathly grip of the virus and renew its tryst with its pre-COVID growth trajectory,” Central bank governor Shaktikanta Das
While the RBI’s growth projections suggest that GDP growth may “turn positive” by Q4, it has officially estimated that the economy will shrink by 9.5% in FY’21, with “risks tilted to the downside”.
“I have always dared to be an optimist, believing firmly in the ability of humankind to overcome the pandemic. In the months gone by, when COVID-19 raged in fury across the world, our hopefulness might have appeared impudent, like a flame flickering amidst a gathering storm. Today, there is a turn in the wind, which suggests that it is not imprudent to dream of a brighter tomorrow even in the bleakest of times,” Das said.
Friday’s decision also marks the end of the first meeting of the new MPC, which was re-constituted after the appointment of three new outside members – economists Jayanth Verma, Ashima Goyal and Shashanka Bhide.
Their appointments were made earlier this week and were widely seen as the reason why the MPC meeting, which was earlier scheduled for September 29 to October 1, was delayed.