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RBI Keeps Rates Unchanged, Predicts -9.5% GDP For 2020-21

Shaktikanta Das, the RBI governor, today said that the country’s economy is likely to contract 9.5 per cent in the current financial year, “with risks tilted to the downside”.

Shaktikanta Das, the RBI governor, today said that the country’s economy is likely to contract 9.5 per cent in the current financial year, “with risks tilted to the downside”. Though he maintained the status quo on policy rates citing high inflation. Governor Das also said that the GDP may break out of the coronavirus-induced contraction and turn positive by the fourth quarter of 2020. However, he stressed that “a faster and stronger rebound is eminently feasible” if the current momentum of upturn gains ground. The decision of holding the repo rate at the existing 4 per cent was taken by unanimously by the Monetary Policy Committee, whose three new external members voted in today’s policy action. It also retained an “accommodative” stance – which rules out any hikes for the time being.

The repo rate – or the key interest rate at which it lends short-term funds to commercial lenders – has been kept at existing 4.0 per cent by the Monetary Policy Committee. The reverse repo rate – at which the RBI borrows from lenders – stood at 3.5%.

The economists, however, had expected the repo rates. In a poll by news agency Reuters, all 66 respondents had predicted a status quo on the repo rate.

The RBI governor also informed that inflation is likely to remain at elevated levels in September, and ease in the third and fourth quarters of the current financial year.

The country is entering into a decisive phase in the fight against the pandemic, Governor Das said, adding: “Relative to pre-COVID levels, several high frequency indicators are pointing to the easing of contractions in various sectors…and the emergence of impulses of growth… By all indications, the deep contractions of Q1 are behind us.”

Governor Das, while talking on the issue of Covid-19, said silver linings are visible in the flattening of the active caseload curve across the country… Barring the incidence of a second wave, India stands poised to shrug off the deathly grip of the virus and renew its tryst with its pre-COVID growth trajectory.”

The chief of the central bank also said that food grain production was set for record highs, and factories, as well as cities, were coming back to life. Against all odds, we shall strive and revive,” the governor concluded.

 

 

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