RBI keeps repo rate unchanged at 4%, projects real GDP growth for 2021 at -7.5%

RBI keeps repo rate unchanged at 4%, projects real GDP growth for 2021 at -7.5%

RBI keeps repo rate unchanged at 4%, projects real GDP growth for 2021 at -7.5%

Rohit Kumar, Editor:  The Reserve Bank of India (RBI) on Friday maintained status quo for the third time in a row and announced that it has decided to keep the key repo rate unchanged at 4 per cent. It has also kept the Marginal Standing Facility (MSF) rate and the bank rate unchanged at 4.25 per cent and the reverse repo rate at 3.35 per cent.

The announcement was made by RBI Governor Shaktikanta Das who said that the Monetary Policy Committee (MPC) has decided to keep the rates unchanged and is in the view that “inflation is likely to remain elevated with some relief in the winter months from prices of perishables and bumper Kharif arrivals”.

“MPC has decided to continue with accommodative stands of monetary policy as long as necessary, at least till current financial year and into next year to revive growth on a durable basis and mitigate the impact of COVID-19 while ensuring that inflation remains within target,” Das was quoted as saying by news agency The indian Nation.

With the RBI keeping the repo rate unchanged at 4 per cent, the Sensex zoom past 44,900. It had last slashed the policy rate on May 22 to support growth amid the ongoing coronavirus pandemic.

GDP growth rate for 2020-21 projected at minus 7.5 per cent  

The central bank has also revised its projection for real GDP growth to minus 7.5 from minus 9.5 per cent for the financial year 2020-21, saying the recovery in rural demand is expected to strengthen further.

Noting that urban demand is also gaining momentum, the RBI projected GDP growth for quarter three at 0.1 per cent 0.7 per cent for quarter four.

The Indian economy shrank by almost 9.3 per cent in the first quarter of the year because of the stringent lockdown that was imposed to curb the spread of the novel coronavirus. However, the second quarter of 2020-21 saw an improvement after the contraction reduced to 7.5 per cent.

While the economy of the country is showing signs of a pick up due to the staggered easing of a lockdown, there is a large degree of uncertainty amid a surge in coronavirus cases.

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