New Delhi, Feb 10 : On expected lines, the Reserve Bank of India (RBI) on Thursday kept the policy repo rate unchanged at 4 per cent to support economic growth. Based on the current macro economic situation and outlook, RBI Governor Shaktikanta Das-led Monetary Policy Committee (MPC) has unanimously decided to keep the key policy repo rate unchanged. “The MPC also decided by a majority of 5 to 1 to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid 19 on the economy while ensuring that inflation remains within the target going forward,” RBI Governor said while announcing the bi-monthly monetary policy.
The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25 per cent. The reverse repo rate also remains unchanged at 3.35 per cent, he added. The rate-setting panel flagged the potential downside risks to economic activity from the highly contagious Omicron variant but noted that the symptoms have remained relatively mild and the pace of infection is moderating as quickly as it surged. Amid mounting inflationary pressure, central banks in advanced economies have started rolling back easy money policy gradually to contain price rise.
As a result of supply chain disruptions and spurt in demand, inflation pressure has been mounting. Global crude prices have crossed $90 per barrel threatening to push fuel inflation besides cascading effect on other items. While the wholesale price-based inflation (WPI) has remained in double-digits for the last almost nine months, the upward trend in retail inflation has also raised alarm bell. Amid worries around inflation, the government has continued its focus on growth.
Spelling out its priority in the Union Budget 2022, Finance Minister Nirmala Sitharaman last week raised capital expenditure by 35.4 per cent to Rs 7.5 lakh crore for the financial year 2022-23. The Minister pegged the fiscal deficit target at 6.4 per cent of GDP for FY23 clearly keeping focus on growth rather than fiscal consolidation. The economy has weathered the Omicron storm but a host of downside risks continue to pose challenge to the recovery process. Not surprisingly, the Economic Survey has projected the real GDP growth rate for FY23 at 8-8.5 per cent, lower than 9 per cent forecast by IMF.
The Survey said that its projection is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal and withdrawal of global liquidity by major central banks will be broadly orderly. The estimate also depends on oil prices being in the range of $70-75 per barrel and global supply chain disruptions steadily easing over the course of the year.
