Economy: RBI keeps revival priority, assures liquidity; downgrades GDP growth to 9.5% in FY22
Virendra Pandit
New Delhi: Keeping status quo on interest rates in the sixth consecutive review meeting on Friday, the Monetary Policy Committee (MPC) of the Reserve Bank of India indicated that reviving the Indian economy’s growth remained its top priority, assured liquidity to spur it, and said it would look into the resurfacing inflation pressures on account of several factors, including hardening of crude oil prices.
“The MPC also decided unanimously to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of Covid-19 on the economy, and also ensure that inflation remains within the target going forward,” RBI Governor Shaktikanta Das said while announcing the decisions.
The RBI has already created a liquidity window of Rs.15,000 crore to help revive hospitality and tourism industries that financially support a lot of people directly and indirectly. With the second wave of the pandemic moderating in the last few weeks, and economic indicators looking up along with unlocking of restrictions, demand is also picking up.
Policy measures on the liquidity front were broadly in line with expectations, with the RBI announcing the third tranche of bond-buying worth Rs 40,000 crore under the Government Security Acquisition Programme (G-SAP 1.0). It also announced G-SAP 2.0, under which it will buy bonds worth Rs 1.2 trillion. The central bank will also buy bonds issued by state governments, unlike G-SAP 1.0 that was only for central government securities, media reported.
In its April policy review meeting, the central bank had announced a bond-buying program from the secondary market of G-SAP of Rs 1 trillion, aimed at enabling a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions.
The central bank revised the growth projection downward from 10.5 percent to 9.5 percent for 2021-22. It was expected but the upward revision in inflation forecast, albeit marginal, surprised the markets. RBI’s inflation projection for the current financial year is at 5.1 percent.
