While the Budget 2021 laid out an expansive fiscal strategy over the medium term to strengthen the growth engine in the economy, the RBI affirmed its support to such a plan through appropriate monetary tools.

The six-member Monetary Policy Committee (MPC) kept the repurchase or repo rate unchanged at 4 per cent, Governor Shaktikanta Das said. Consequently, the reverse repo rate will continue to earn 3.35 per cent for banks for their deposits kept with the RBI. Signalling rollback of pandemic-era policies, the RBI announced a gradual increase in the Cash Reserve Ratio (CRR) -- the amount of deposits lenders must set aside as reserves -- to 3.5 per cent by March and to 4 per cent by May. The cash returning to the central bank can be used by it for open market operations and other liquidity measures.

RBI expects GDP for next year to grow by 10.5 per cent, a tad lower than 11 per cent predicted by the government’s Economic Survey last week.