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RBI keeps repo rate unchanged at 4 per cent, projects 10.5 per cent GDP growth in FY22
05-February-2021

The Reserve Bank of India (RBI) on Friday left interest rates unchanged at 4 per cent. This is the fourth time in a row when the RBI has left the rate unchanged.

"Central bank to maintain accommodative monetary policy stance to support growth, keep inflation at targeted level," Governor Shaktikanta Das said.

It may be recalled that the committee kept the interest rates unchanged in its last three reviews, maintaining repo rate at four per cent and the reverse repo rate at 3.35 per cent. The RBI had last revised its policy rate on May 22 last year.

He said MPC voted for keeping interest rate unchanged and decided to continue with its accommodative stance to support growth. The 27th meeting of the rate-setting MPC with three external members -- Ashima Goyal, Jayanth R Varma and Shashanka Bhide -- began on February 3. This is the first meeting of the rate setting panel after the Budget 2021-22, announced this week, projected a nominal GDP growth rate of 14.5 per cent and a fiscal deficit of 6.8 per cent for the financial year beginning April 1. The government moved the interest rate setting role from the RBI Governor to the six-member MPC in 2016. Half of the panel, headed by the Governor, is made up of external independent members.

Das said that the outlook on growth has turned out to be positive and signs of recovery has strengthened further. Das also projected India's GDP to grow at 10.5 per cent in the next fiscal.

Notably, the Economic Survey had said that there are expectations of a rebound of the economy with a 11 per cent growth in the next fiscal and this can be another "supporting factor for RBI to decide the future course of action".

Das added that Inflation has returned to tolerance band of 4 per cent. He said that the government will review inflation target for RBI by March 2021 and inflation targeting has worked well.

"Vegetables prices likely to remain soft in near term; inflation to be revised to 5.2 per cent in Q4 of FY21," he said.

He also hailed the Union Budget tabled by Finance Minister Nirmala Sitharaman on February 1, saying the Budget has provided impetus to health and infrastructure sectors.