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Thursday, October 22, 2020

RBI keeps rates unchanged at 4%, says GDP to contract by 9.5% this fiscal

RBI Monetary Policy 2020: Governor Shaktikanta Das said India's GDP would contract by 9.5 per cent in the current fiscal due to the disruptions caused by the coronavirus pandemic.

By: Express Web Desk | New Delhi | Updated: October 9, 2020 3:59:10 pm
repo rate, repo rate unchanged, RBI, RBI repo rate, RBI news, RBI MPC meeting, Shaktikanta DasRBI Governor Shaktikanta Das addresses the press in Mumbai. (Express Photo: Nirmal Harindran, File)

RBI Monetary Policy 2020: The Monetary Policy Committee of the Reserve Bank of India Friday kept the repo rate unchanged at four per cent. RBI Governor Shaktikanta Das said the committee unanimously voted to keep rates unchanged, and decided to maintain its accommodative monetary policy stance to support growth amid the pandemic. He also said the Indian economy was entering into a “decisive phase” in the fight against Covid-19, reported news agency PTI.

Addressing a press conference, Das said India’s GDP would contract by 9.5 per cent in the current fiscal due to the disruptions caused by the coronavirus pandemic. However, he said the contraction in economic growth of Q1 was behind us, and “silver linings are visible”. Das also said the GDP growth may break out of contraction and enter a positive zone by the fourth quarter of this fiscal.

“Modest recovery in first half of the year could further strengthen in second half… economic activity to gain traction in third quarter,” Das was quoted as saying by PTI.

The six-member MPC met this week following the induction of three new independent members, Shashanka Bhide, Ashima Goyal and Jayanth R Varma.

The central bank was forced to postpone the bi-monthly meeting of the MPC scheduled for September 29, 30 and October 1 as the government failed to nominate its three members to the six-member panel. MPC is the statutory committee that fixes the key policy interest rate and monetary policy stance of the country as well as the inflation target. The tenure of the three members appointed by the government in 2016 expired after the previous policy on August 6, when the repo rate was kept steady at 4 per cent.

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Dr Joseph Thomas, Head of Research at Emkay Wealth Management, said, “The RBI policy is on expected lines, as it keeps the base rate unchanged and the policy stance accommodative. The probability of RBI cutting rates in the near future remains quite low in view of the higher inflationary pressures.”

Nish Bhatt, Founder & CEO of Millwood Kane International, meanwhile, said, “Going forward, the expectation of RBI of GDP growth from current contraction is positive, help boost sentiment. Good monsoon, favorable high-frequency indicators, pent-up demand, and the upcoming festive season set the stage for an economic recovery.”

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