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RBI Retains GDP Projection Of 9.5% For 2021-22; CPI Inflation Projected Above Tolerance Level

The MPC voted unanimously to keep the policy repo rate unchanged at 4% and maintain an accommodative stance.

The Reserve bank of India (RBI) on Friday maintained the status quo on interest rates after deliberations by the Monetary Policy Committee (MPC) and retained India's GDP growth projection of 9.5% for FY 2021-22.

The MPC voted unanimously to keep the policy repo rate unchanged at 4% and maintain an accommodative stance.

"Continued policy support from all sides is required to nurture growth—the prevailing repo rate has been retained at 4% with a continued accommodative stance," RBI Governor ShaktiKanta Das said while warning that India should not lower its guard in terms of the rising third wave of infections in some parts of the country.

Reverse repo rate remains at 3.35%, Marginal Standing Facility Rate, and Bank Rate at 4.25%. 

On growth rate, the Governor said, the projection for real GDP growth is retained at 9.5% in 2021-22.

The RBI cut India's GDP forecast for this fiscal year by a percentage point to 9.5% in its June policy. The inflation forecast for FY22 was 5.1 percent, well above the standard ballpark target of 4%.

"The CPI surprised in May, and in June, the inflation hardened. Recent inflationary pressure is a cause of concern.
Inflation will remain above tolerance levels in the second quarter, and CPI inflation is projected to be 5.7% n 2021-22 and 5.1% in the next fiscal year," said the Governor.

According to the Governor, the corporates could maintain their sales growth and external demand remained buoyant in the first half of this year.
 
The markets cheered RBI's decision to keep the rates unchanged. The BSE Sensex traded up 45 points at 54,537, while the Nifty 50 was up 15 points at 15,309.
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