The Reserve Bank of India on Thursday decided to maintain the status quo on rates and kept the repo rate unchanged at 5.15 per cent as inflation trajectory remained “uncertain” and economic growth remained subdued. The decision was taken at the meeting of the Monetary Policy Committee (MPC) led by RBI Governor Shaktikanta Das.
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“The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target,” the RBI said in a statement after the MPC meeting.
Click here to read the Sixth bi-monthly Monetary Policy Statement, 2019-20
This was the sixth and last monetary policy review for the current financial year and comes just days after the Union Budget 2020-21, which had estimated a nominal GDP growth rate of 10 per cent next fiscal with fiscal deficit of 3.5 per cent. The Economic Survey has pegged GDP growth to recover to about 6 per cent to 6.5 per cent next fiscal from about 5 per cent this fiscal.
The MPC had also kept the repo rate unchanged in the fifth bi-monthly monetary policy review in December. Previously, it had cut rate five times in eight months as it looked to bolster lagging growth by spurring demand.
The Committee noted that there is policy space available for future action. The MPC has also projected GDP growth for 2020-21 at 6.0 per cent – in the range of 5.5-6.0 per cent in the first half and 6.2 per cent in the third quarter next fiscal.
It has revised upwards the the CPI inflation projection to 6.5 per cent for fourth quarter of the fiscal and 5.4-5.0 per cent for first half of 2020-21; and 3.2 per cent for third quarter next fiscal, with risks broadly balanced.
“The path of inflation is, however, elevated and on a rising trajectory through Q4:2019-20. The outlook for inflation is highly uncertain at this juncture,” it said, adding that on the other hand, economic activity remains subdued and the few indicators that have moved up recently are yet to gain traction in a more broad-based manner.
“Given the evolving growth-inflation dynamics, the MPC felt it appropriate to maintain status quo,” it said, adding that it will persevere with the accommodative stance as long as necessary to revive growth, while ensuring that inflation remains within the target.
Chetan Ghate, Pami Dua, Ravindra H. Dholakia, Janak Raj, Michael Debabrata Patra and Shaktikanta Das voted in favour of the decision.