Updated: December 8, 2021 12:24:24 pm
RBI Monetary Policy 2021: The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) kept the repo rate unchanged at 4 per cent for the ninth consecutive time while maintaining an ‘accommodative stance’ as long as necessary, RBI Governor Shaktikanta Das announced on Wednesday.
The central bank governor said that the MPC had voted unanimously 5:1 to maintain the accommodative stance and added that the reverse repo rate too was kept unchanged at 3.35 per cent.
The Marginal Standing Facility (MSF) rate and bank rate also remained unchanged at 4.25 percent.
The RBI had last revised its policy repo rate or the short-term lending rate on May 22, 2020, in an off-policy cycle to perk up demand by cutting the interest rate to a historic low.
Speaking on the GDP, Das said that the projection for real GDP growth is maintained at 9.5 per cent. However, the RBI revised its Q3FY22 GDP growth to 6.6 per cent from 6.8 per cent earlier. Additionally, Q4FY22 GDP was cut to 6 per cent from 6.1 per cent earlier. The real GDP growth is projected at 17.2 per cent for Q1FY23 and at 7.8 per cent for Q2FY23.
Speaking about inflation, the RBI governor said that the FY22 CPI inflation target is maintained at 5.3 per cent. This consists of 5.1 per cent in Q3FY22, and 5.7 per cent in Q4FY22 with risks broadly balanced.
Das said the headline inflation would peak in the fourth quarter of the current fiscal.
“Price pressures may persist in the immediate term. Vegetable prices are expected to see a seasonal correction with winter arrivals in view of bright prospects for rabi crops,” Das said.
In his speech, Das also touched upon petrol and diesel prices and said that the recent cuts in taxes on petrol and diesel should support the purchasing power of the consumer.
He added that the government consumption has also picked up from August, providing support to the aggregate demand.
How economists and market experts reacted:
- Deepthi Mathew, Economist at Geojit Financial Services, said: “The decision to keep the rates unchanged was on the expected line. Though the economy is recovering, it is early to say that it is a broad-based recovery, which still requires support from the central bank. The growth-inflation trade-off is getting prominent in the global economy. The rising inflation rate has forced various central banks to increase the pace of monetary policy normalization. However, there hasn’t been any considerable revision on the inflation forecast by RBI and maintained it at 5.3 per cent for FY22. As the favorable base effect wanes off from November ’21, we could expect some upward pressure in the inflation rate in the coming months.”
- Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services, said: “Overall, there were no surprises in the policy today and it was broadly a non-event. Going forward, we fear that real GDP growth could be lower than the RBI projections, with inflation falling broadly in line. Along with the rising threat from the Omicron variant, *there is a possibility that a hike in reverse repo could be postponed further to April 2022. However, if growth turns out to be better than our expectations (or in line with/better than RBI projections) and Omicron threat doesn’t materialise, a 15 bps hike in reverse repo rate in Feb ’22 cannot be ruled out. In any case, the Union Budget 2022-23 will also play an important role in the next MPC meet.”
- Shanti Lal Jain, MD & CEO at Indian Bank, said: “We welcome the much-needed move of the RBI to maintain the status quo and continue with the accommodative stance. This will continue to support economic growth while keeping inflation in check. The measures on the Digital front and easing of capital infusion norms of overseas branches will further help in the growth of the banking business. Sufficient liquidity in the system will further push the credit growth at a much faster pace.”
- Sandeep Runwal, President at NAREDCO Maharashtra and Managing Director at Runwal Group, said, “The RBI has always taken a proactive stance to ensure liquidity in the past few months, and has continued its accommodative policy stance amid the renewed Covid threat from the Omicron variant. It is imperative that low mortgage rates would continue, at least till the end of the year. This will provide the required fuel for the growth of the economy along with the real estate industry to which several other allied sectors are linked with. We at NAREDCO have already urged the State Government to reconsider their decision and reinstate the stamp duty reduction for another year so as to encourage home buyers and invest in their dream homes.”
- Shishir Baijal, Chairman & Managing Director at Knight Frank India, said, “The low interest rate regime has been instrumental in reviving the real estate sector in the last 6 quarters through their systematic approach. RBI’s efforts, along with other demand stimulant measures, have helped revive demand that had been languishing for close to 7 years prior to 2020. The continuance of the accommodative stance will help further the cause for the sector.”
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