RBI Monetary Policy Review: Repo Rate Unchanged At 4%, Real GDP Growth Estimated At 10.5% For 2021-22

The RBI has mantained an 'Accomodative Stance' to sustain growth on durable basis and continue to mitigate the impact of Covid-19 on economy and ensure that inflation remain within the target. 

RBI monetary policy review

Reserve Bank of India (RBI) governor Shaktikanta Das on Wednesday announced maintaining the status quo and kept policy rates unchanged. In the first by-monthly monetary policy statement of fiscal 2021-22. The decision has been taken after three-day review meeting of the six-member Monetary Policy Committee, or the rate-setting panel, of RBI, headed by Das.

"Global growth is gradually recovering from slowdown but remains uncertain. Vaccine distribution and its efficacy is key to global economic recovery," said Das.

The RBI has mantained an 'accomodative stance' to sustain growth on durable basis and continue to mitigate the impact of Covid-19 on economy and ensure that inflation remain within the target. 

Here are key measures announced by RBI

• GDP growth outlook for FY22 is maintained at 10.5 percent. The MPC had projected this estimate during the previous policy announcement.
• Q1FY22 GDP growth outlook is 22.6 percent, and for Q2FY22 at 8.3 percent.
• This means the repo rate is maintained at 4 percent and reverse repo rate at 3.35 percent.
• Marginal standing facility and the banking rate remains unchanged at 4. 2 per cent.
• Loan limit under priority sector lending to agriculture sector has been increased to Rs 60 lakh from Rs 50 lakh
• The projection for CPI inflation has been revised to 5 per cent in Q4 of 2021, 5.2 per cent, in Q1 of 2021-22, 5.2 per cent also in Q2 of 2021-22, 4.4 per cent in Q3, and 5.1 per cent in Q4 with risks broadly balanced
• On March 31, 2021, the government retained the inflation target at 4 per cent with the lower and upper tolerance levels of 2 per cent and 6 per cent, respectively, for the next five years that is from April 2021 to March 2026.
• Governor announced the liquidity support of Rs 50,000 crore to be provided to NABARD, NHB and Sidbi
  Real GDP growth at 22.6 per cent in Q1FY22, 8.3 per cent in Q2FY22; real GDP growth at 5.4 per cent in Q3FY22, 6.2 per cent in Q4FY22
• RBI is indirectly expanding liquidity. Liquidity management has ensured borrowing of Rs 22 lakh crore by the centre, said RBI governor Shaktikanta Das.
• Five Open Market Operations were announced in March 2021 to ensure ample liquidity in the market

It was expected that the Monetary Policy Committee (MPC) will maintain status quo and keep the key interest rates steady. Economists were also expecting RBI to revise its inflation forecast for the second half of the next fiscal because of rising input costs, commodity prices and sticky core inflation.

In February review, the RBI projected inflation at 5.2-5 per cent for the first half of the fiscal 2022 and 4.3 per cent for Q3FY22.

A post-policy press conference will be held at 12 pm. The repo rate is at 4 per cent and reverse repo rate stands at 3.35 percent. The MPC review comes amid inflationary concerns and the second wave of pandemic forcing states to impose restrictions. On February 5, the MPC had kept lending rates unchanged, and maintained its "accommodative" policy stance.

The MPC has cut the repo rate by 250 bps since February 2019.