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RBI Keeps Benchmark Rates, GDP Projections Unchanged Amid Omicron Threat

In its bi-monthly policy review, RBI maintained a status quo on key rates.

RBI Governor Shaktikanta Das (File Photo)

New Delhi: The Reserve Bank of India kept the benchmark lending rates unchanged for the ninth time at 4 per cent on Wednesday. The Monetary Policy Committee has decided to continue with an accommodative stance to revive and sustain growth on durable basis while the country battles the Omicron threat.

In the last policy review in October, the RBI had kept the key lending rates unchanged for eight consecutive times. The repo rate, at which the RBI lends short-term funds to banks, was kept unchanged at 4 per cent. The reverse repo rate, at which the RBI borrows from banks, was kept unchanged at 3.35 per cent. The Marginal Standing Facility (MSF) rate was also kept unchanged at 4.25 per cent.

“Monetary Policy Committee (MPC) voted unanimously to keep the policy repo rate at 4 per cent and the stance remains accommodative. MSF rate and bank rate remain unchanged at 4.25 per cent. Reverse repo rate also remains unchanged at 3.35 per cent, “said RBI Governor Shaktikanta Das following MPC meeting on Wednesday (Dec 8).

The last time the RBI changed the policy rate was in May 2020.

READ ALSO: Covid-19 India Update: With 8,439 New Cases, 23% Higher Than Yesterday

GDP Projections Unchanged

The apex bank remained optimistic about the economic recovery and added that the Indian economy has hauled itself out of its deepest contraction and the country is better prepared to deal with COVID-19. It had kept the Gross Domestic Product rate unchanged at 9.5 per cent for FY 2021-22.

“The projection for real GDP growth is retained at 9.5 per cent in 2021-22, consisting of 6.6 per cent in Q3, and 6 per cent in Q4. Real GDP growth is projected at 17.2 per cent for Q1 of 2022-23 and at 7.8 per cent for Q2 of 2022-23,” said RBI Governor Das.

On inflation and rising fuel prices the apex bank added that recent reduction in excise duty and VAT will help ease price pressure but food articles may see seasonal corrections.

ALSO READ: Omicron Threat: India May Witness Massive Third Covid Wave; No Need For Travel Ban, Says IMA

“Recent reductions in excise duty and state VAT on petrol and diesel should support consumption demand by increasing purchasing power. Govt consumption is also picking up from August, providing support to aggregate demand,” he said.

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“The persistence of CPI inflation excluding food and fuel since June 2020 is an area of policy concern in view of input cost pressures that could rapidly be transmitted to retail inflation as demand strengthens,” he added.

“Price pressures may persist in the immediate term. Vegetable prices are expected to see a seasonal correction with winter arrivals in view of bright prospects for Rabi crops,” said RBI Governor Shaktikanta Das.

The RBI has projected CPI inflation at 5.3 per cent in 2021-22. This consists of 5.1 per cent in Q3, and 5.7 per cent in Q4 with risk broadly balanced. Separately, the RBI Governor informed that the top bank is mulling to launch UPI-based payment products for feature phone users.

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