RBI Governor Shaktikanta Das Announced Repo Rate Unchanged At 4%, Projects CPI Inflation for 2021-22 under 5%

Mumbai, 7 April 2021 – Well the RBI monetary committee is meeting up and keeping the repo rate unchanged at 4% and maintains accommodative stance and the reverse repo rate stands at 3.35%. RBI Governor Shaktikanta Das said – “This is the monetary policy statement. The monetary policy committee MPC met on 5th, 6th, and 7th April 2021 and deliberated on current and evolving macroeconomic and financial developments, both domestic and global. The MPC voted unanimously to leave the policy report rate unchanged at 4%.”

There was a talk about an increase in interest rates or a decrease in interest rates a few days back which was which had to be clarified by none other than the finance minister Nirmala Sitharaman. This is being done keeping in mind what the economy is going to brace itself for. Considering that COVID-19 is back with a vengeance.

The RBI keeping the repo rate unchanged at 4%. People were expecting it to go down. But, the RBI and the government, you know in tandem is making sure or rather bracing itself for another economic crisis about the resurfacing of COVID-19.

Apart from the fact that you know that the COVID-19 is making research. I think the main reason why the Repo Rate and the reverse repo rate has been kept unchanged is that the inflation levels haven’t come down. In fact, because of the petrol and diesel prices and some of the food prices. We saw the inflation rate hovering around five between 5% and 6%. The CPI as we call it, the consumer price index. 

So, it comes you know, that comes as a bit of a dampener as far as the fall in interest rates are concerned. The important thing we need to know is that RBI has an assured that is accommodating a stance would continue that is the dovish approach with the RBI has been showing from the beginning of Corona is going to continue. There’s going to be no change in the stance the liquidity in the whole system will be insured. I mean, there’s got to be no shortage of money as much as we call it as liquidity in the RBI parlance on monetary policy parlance. 

So, that is going to be there. But the inflation forecast has been kept around between 5% to 5.5%. But it has introduced many other measures which ensure that the liquidity is going to remain. And another important aspect we need is that the overall prospects of the economy have been very, very optimistically presented that is the rural demand is going to remain strong, the urban demand will keep increasing India’s growth rate projections have been capped at 10.5% all the way to be tapering down as the quarters’ progress in this fiscal year. But then basically I would say an optimistic outlook is the supportive outlook of RBI like it has been ever since the lockdowns happened. 

RBI was the leader in terms of driving the economy to ensure that there is enough liquidity, there is no shortage of funds, where the MSME, the industry they does not face a fund shortage. So, I think I need to put my on record my word of appreciation for the role played by RBI during this entire pandemic crisis.

We heard the IMF chief economist Gita Gopinath talking about India’s GDP projections to be 12.5%. The RBI governor saying 10 points, we heard from the World Bank. We’ve been hearing from several agencies you know about India’s very positive and buoyant outlook. But, there is that big question of ‘But’ that is the corona research and the kind of mini lockdown. So, the localized lockdown we are observing in states like Maharashtra, Madhya Pradesh, Punjab and so and so forth Rajasthan, and now Delhi we observing Night curfew. 

I think this might act as a dampener because the coming on track of the economy can be affected severely if the corona surge continues and the government’s in the state governments are compelled to impose logistics restrictions and restrictions on hospitality restrictions on the overall tourism sector. I think it is all interrelated so I feel that if Corona is doesn’t get controlled, the expected growth projections are difficult to meet.