RBI says growth impulses strengthening, inflation trajectory favourable

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RBI says growth impulses strengthening, inflation trajectory favourable
Crowds at a wholesale vegetable market in Kolkata. According to the RBI, the real GDP growth for the first quarter of FY 2022-23 is projected at 17.2 per cent.Courtesy: Reuters

Gross Domestic Product (GDP) for the financial year (FY) of 2021-22 has been retained at 9.5 per cent. RBI Governor keeps the repo rate unchanged for the eighth time straight and continues with an accommodative stance.

In a classic statement illustrating that India’s growth rate has seen stability, post the second wave of the pandemic that had gripped certain parts of the country, The Reserve Bank of India (RBI) informed that the projection for Gross Domestic Product (GDP) for the financial year (FY) of 2021-22 has been retained at 9.5 per cent.

Adding justification that one should be cautiously optimistic about India’s economic recovery The Reserve Bank of India (RBI) today kept the repo rate unchanged for the eighth time straight and continued with an accommodative stance.

The repo rate -- the central bank's lending rate -- remains unchanged at 4 per cent and the reverse repo rate -- borrowing rate -- at 3.35 per cent.

In addition, the Consumer Price Index (CPI) inflation has been put at 5.3 per cent for the financial year 2022.

Addressing the media after the Monetary Policy Committee (MPC) meeting, RBI Governor Shaktikanta Das said, "India is in a much better place today than at the time of the last MPC meeting. Growth impulses are strengthening, inflation trajectory more favourable than expected.

"The projection for real Gross Domestic Product (GDP) growth is retained at 9.5 per cent for FY 2021-22. This consists of 7.9 per cent in the second quarter, 6.8 per cent in the third quarter and 6.1 per cent in the fourth quarter of 2021-22," Das said. He further informed that the real GDP growth for the first quarter of FY 2022-23 is projected at 17.2 per cent.

RBI Governor Shaktikanta Das addresses during a press conference in Mumbai on Friday. India’s Consumer Price Index (CPI) inflation for the first quarter of the financial year (FY) 2022-23 has been projected at 5.2 per cent.
RBI Governor Shaktikanta Das addresses during a press conference in Mumbai on Friday. India’s Consumer Price Index (CPI) inflation for the first quarter of the financial year (FY) 2022-23 has been projected at 5.2 per cent.Courtesy: ANI

Notably, the Consumer Price Index (CPI) inflation for the first quarter of the financial year (FY) 2022-23 has been projected at 5.2 per cent. "High-frequency indicators suggest economic activity has gained momentum. Core inflation remains sticky. July-September Consumer price Index (CPI) inflation was lower than anticipated," the RBI Governor added. According to Das, pent-up demand during the festival season should boost urban demand.

Retail inflation stood at 5.3 per cent in August

"Recovery in demand gathered pace in August-September. Pick-up in import of capital goods point to some recovery in activity," Das said while hoping to sail towards normal times, due to resilience of economic fundamentals of the Indian economy.

Das further said, "RBI's approach is that of gradualism, don't want suddenness or surprises."

Recovery in demand gathered pace in August-September. Pick-up in import of capital goods point to some recovery in activity. RBI's approach is that of gradualism, don't want suddenness or surprises.
- Shaktikanta Das, Governor, RBI

Notably, the repo rate has remained unchanged for the eighth time and has continued with an accommodative policy stance for 'as long as necessary to revive and sustain growth on a durable basis'.

A man celebrates outside the Bombay Stock Exchange (BSE) in Mumbai. Sensex crossed 60,000 level for the first time. According to the RBI Governor, "The worst of the second wave is behind us, and substantial pickup in COVID-19 vaccination, giving greater confidence to open up and normalize economic activity.”
A man celebrates outside the Bombay Stock Exchange (BSE) in Mumbai. Sensex crossed 60,000 level for the first time. According to the RBI Governor, "The worst of the second wave is behind us, and substantial pickup in COVID-19 vaccination, giving greater confidence to open up and normalize economic activity.”Courtesy: Reuters

Mitigate the impact of Covid

The policy decision has been taken to mitigate the impact of COVID-19 on the economy while ensuring inflation remains within the target, RBI Governor Shaktikanta Das said.

"The MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2026, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent," he said.

RBI had last revised its policy repo rate, the central bank's lending rate, on May 22, 2020, in an off-policy cycle to perk up the demand by cutting interest rate to a historic low. The repo rate -- the central bank's lending rate -- remains unchanged at 4 per cent and the reverse repo rate -- borrowing rate -- at 3.35 per cent.

"The worst of the second wave is behind us, and substantial pickup in COVID-19 vaccination, giving greater confidence to open up and normalize economic activity," he added.

- ANI

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