RBI's Monetary Policy Committee Raises Concern, Says Rising Covid Cases Risk To Economy Recovery

All the six members of the MPC agreed that the ongoing domestic vaccination drive would remain key to tackle the the short-term risks to domestic economic recovery and manage the spillovers from global shocks.

RBI | AFP

In the wake of steep rise in the Covid-19 cases across the country, the Reserve Bank of India Governor Shaktikanta Das stressed that it remains the single biggest challenge to economic recovery.

In a monetary policy committee (MPC) meeting minutes released on Thursday, all six members pointed out at the increased risks to economic recovery from the sudden spike in infections and said monetary policy must continue to support growth.

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Here are key observations of the MPC members

"The need of the hour is to effectively secure the economic recovery underway so that it becomes broad-based and durable. The renewed jump in Covid-19 infections in several parts of the country and the associated localised and regional lockdowns add uncertainty to the growth outlook," RBI Governor Shaktikanta Das said.

"Longer term inflation expectations remain broadly stable in spite of high volatility in food and fuel prices. Demand pull is still weak," Michael Patra, deputy governor at the RBI wrote. "I would continue to look through the recent elevation in inflation and remain focused on reviving the economy on a path of strong and sustainable growth." 

It raised concerns regarding the flattening of infections. "The economic recovery can come under risk if this new wave of infections is not flattened soon," said Mridul Saggar, executive director at RBI and a member of the MPC. "This is especially so as monetary and fiscal policies have already used most of their space to considerably limit loss of economic capital, though expansion of policy toolkits can still afford additional comfort," he added.

Once again the RBI noted about maintaining ample surplus liquidity through conventional and unconventional measures, and that going forward, it would continue to ensure ample surplus systemic liquidity.

All members agreed that the ongoing domestic vaccination drive would remain key to tackle the the short-term risks to domestic economic recovery and manage the spillovers from global shocks.

In its last monteray review , the MPC had left key rates unchanged due to heightened uncertainty about the impact of the second wave of infections on growth and pressure on retail inflation.

March wholesale price-based inflation rose 7.39 per cent, sharply above an analysts' forecast for a 5.9 per cent increase, while retail prices rose to a four-month high of 5.52 per cent.