Bombay, December 8 (IANS) To support a long-lasting and lasting economic recovery amid concerns over the Omicron variant of the coronavirus, the Reserve Bank of India on Wednesday retained its policy rates as well as its accommodative growth-oriented stance in the penultimate review monetary policy for fiscal year 22.
India’s central bank’s Monetary Policy Committee (MPC) voted to keep the repo rate, or short-term loan rate, for commercial banks at 4%.
The Repo Rate (RR) is the rate at which the RBI lends money to commercial banks or financial institutions against government securities.
The repo rate was also kept unchanged at 3.35 percent, and the Permanent Marginal Facility (MSF) rate and âbank rateâ at 4.25 percent.
MPC was generally expected to maintain rates alongside its dovish stance.
In a virtual address after the bimonthly MPC meeting, RBI Governor Shaktikanta Das said the economic recovery disrupted by the second wave of the pandemic is gaining traction.
However, this recovery is still not strong enough to be self-sustaining and lasting, therefore, supportive political measures such as an accommodating position are needed, he added.
With the RBI keeping India’s GDP growth projection for fiscal 22 at 9.5%, Das pointed out that GDP is expected to grow 6.6% in the third quarter, 6% in the fourth quarter, 17.2 % in the first quarter of fiscal 23 and 7.8% for the second quarter of fiscal year.
âOverall, the recovery that was interrupted by the second wave of the pandemic is picking up steam, but it is not yet strong enough to be self-sustaining and sustainable. This underlines the vital importance of continued political support, âhe said.
âDownside risks to the outlook have increased with the emergence of Omicron and further surges of Covid-19 infections in a number of countries.
âIn addition, CPI-based inflation is projected at 5.3% for fiscal 22. CPI inflation is expected to decline to 5% in the first quarter of fiscal 23 and remain at 5%. in the second quarter of fiscal year 23.
âIn the current situation, it is important to keep inflation aligned with the target while focusing on a robust recovery in growth,â Das said.
âAt the same time, the Reserve Bank remains aware of the need to ensure that financial conditions are rebalanced in a systematic, calibrated and well-telegraphed manner while preventing the build-up of risks to financial stability,â he said. -he adds.
India Inc welcomed the MPC’s decision.
“The status quo on the repo rate while pursuing an accommodative stance was widely expected, especially in light of the latest global developments and the emergence of a new variant of concern,” said the chairman of the FICCI, Uday Shankar.
âThe latter presents a major downside risk for the future and it remains extremely critical to remain cautious. In this context, the RBI policy statement is reassuring.
State Bank of India Chairman Dinesh Khara said, âThe RBI’s policy announcement addresses monetary policy and currency separately, with rate fixing separate from calibrated liquidity management. The outlook for growth and inflation appears to be delicately balanced even as the threat of the Omicron virus has put an element of uncertainty all around.
âThe announcement regarding the injection of capital into overseas branches without the prior approval of the RBI will provide operational and transparent flexibility. The decision to revisit the payments landscape and further refine UPI transfer for low-value transactions could foster mass digitization. The clarification regarding the transition from âLIBOR to ARRâ is also welcome. “
PHD Chamber of Commerce and Industry President Pradeep Multani said the accommodative policy stance at this point would not only pave the way for double-digit GDP growth for the current year 2021-2022. , but would also help create a strong, sustainable and dynamic economy. go forward.
Assocham General Secretary Deepak Sood said: âWe fully agree with Governor Shaktikanta Das’ statement that while the economic recovery has picked up steam, it is not yet strong enough. to be autonomous and sustainable.
“Therefore, continued monetary policy support for growth dynamics is of the utmost importance, especially when there are signs of a pickup in private investment.”