RBI’s MPC Keeps Repo Rate Unchanged at 4%, Shaktikanta Das Says Real GDP Growth to Remain Negative

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August 6, 2020

RBI Governor Shaktikanta Das.

It was widely expected that the central bank will either cut the key rates due to India’s worsening economic outlook as coronavirus cases soar in spite of inflationary pressures.

News18.com

Last Updated: August 6, 2020, 12:23 PM IST

The Reserve Bank of India’s Monetary Policy Committe has left the key lending rates – repo rate and reverse repo rate – unchanged, RBI Governor Shaktikanta Das announced on Thursday as the central bank predicted real GDP growth to remain negactive for 2020-21.

Continuing with the accommodative stance, Das said that the monetary policy committee decided to keep policy repo rate at 4 per cent and reverse repo rate at 3.35 per cent. “Early signs of revival in May/June were subdued in July due to renewed surge in COVID-19 cases,” he said.

Repo rate is the rate at which RBI lends funds to commercial banks when needed. In 2020, the RBI has already cut repo rate by 115 basis points.

It was widely expected that the central bank will cut the key rates further due to India’s worsening economic outlook as coronavirus cases soar despite inflationary pressures.

Around two-thirds of economists in a Reuters poll had expected the Reserve Bank of India (RBI) to cut the repo rate by another 25 basis points (bps) and once more next quarter to a record low of 3.50 per cent.

Annual retail inflation rose in June to 6.09 per cent from 5.84 per cent in March, remaining above the RBI’s medium-term target range of 2 per cent to 6 per cent.

The RBI’s recent policies have focused on financial stability and the need to support growth despite the price target.

The country was placed under one of the strictest lockdowns in the world in late March for over two months to halt the spread of the coronavirus. The government gradually eased restrictions in June although infections continue to rise.

Most analysts expect the economy to contract 20 per cent in the June quarter versus the April forecast of a 5.2 per cent fall and remain in negative terrain until the December quarter.

For the full year 2020/21, the economy is likely to shrink 5.1 per cent which would be its weakest performance since 1979, a sharp contrast to the 1.5 per cent expansion forecast in April.

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RBI’s MPC Keeps Repo Rate Unchanged at 4%, Shaktikanta Das Says Real GDP Growth to Remain Negative

It was widely expected that the central bank will either cut the key rates due to India’s worsening economic outlook as coronavirus cases soar in spite of inflationary pressures.

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