Policy Support: Rbi Mpc Retains Accommodative Stance, Rates (ld)

Policy support: RBI MPC retains accommodative stance, rates (Ld)

Mumbai, April 7 : To support a faster economic recovery amid a resurgence in Covid-19 cases, the Reserve Bank retained its key short-term lending rates along with the growth-oriented accommodative stance during the first monetary policy review of FY22.

 Policy Support: Rbi Mpc Retains Accommodative Stance, Rates (ld)-TeluguStop.com

Accordingly, the Monetary Policy Committee (MPC) of the central bank voted to maintain the repo rate, or short-term lending rate, for commercial banks, at 4 per cent.

Likewise, the reverse repo rate was kept unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the ‘Bank Rate’ at 4.25 per cent.

In a virtual address after the Monetary Policy Committee’s bi-monthly meet, RBI Governor Shaktikanta Das said that the growth rate forecast has been retained at 10.5 per cent.

Besides, he said India’s GDP is expected to grow on the back of accelerated anti-Covid vaccination drive as well as gradual release of pent up demand.

However, he warned against the resurgence of Covid-19 infections and high commodity prices.

Furthermore, RBI has pegged retail inflation for the April-June quarter of the current financial year at 5.2 per cent.

According to Das, the evolving CPI inflation trajectory is likely to be subjected to both upside and downside pressures.

“The bumper foodgrains production in 2020-21 should sustain softening of cereal prices going forward, while the prices of pulses, particularly tur and urad, remain elevated, the incoming rabi harvest arrivals in the markets and the overall increase in domestic production in 2020-21 should augment supply which, along with imports, should enable some softening of these prices going forward,” he said.

The RBI Governor cited that while edible oils inflation has been ruling at heightened levels with international prices remaining firm, reduction of import duties and appropriate incentives to enhance productivity domestically could work towards a better demand-supply balance over the medium-term.

Suggesting that the states and the Centre should take steps to control the rising fuel prices, Das said: “Pump prices of petroleum products have remained high.Reduction of excise duties and cesses and state level taxes could provide some relief to consumers on top of the recent easing of international crude prices.This could slow down the propagation of second round effects.”

The impact of high international commodity prices and increased logistics costs are being felt across manufacturing and services, he added.

Finally, inflation expectations of urban households one year ahead showed a marginal increase over the three months ahead horizon according to the RBI’s March 2021 survey.

“Taking into consideration all these factors, CPI inflation is now projected as 5.0 per cent in Q4:2020- 21; 5.2 per cent in Q1:2021-22, 5.2 per cent in Q2, 4.4 per cent in Q3 and 5.1 per cent in Q4, with risks broadly balanced

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