Real GDP to Contract by 9.5%; Repo Rate Unchanged at 4%: RBI Guv

The contraction in economic growth of Q1 is behind us and silver linings are visible, Shaktikanta Das said.

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Business
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File photo of RBI Governor Shaktikanta Das.
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The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has voted unanimously to leave the policy repo rate unchanged at 4 percent, central bank Governor Shaktikanta Das announced on Friday, 9 October. The reverse repo rate also will remain unchanged at 3.35 percent.

"The MPC also decided to continue with the accommodative stance of monetary policy for as long as necessary at least through the current financial year and next year," he said.

On GDP Growth

On the question of economic growth amid the COVID-19 crisis, Das on Friday said that real GDP is expected to contract by 9.5 percent in the current fiscal.

"GDP growth may break out of contraction and enter positive zone by Q4 of current fiscal... Modest recovery in first half of the year could further strengthen in the second half... Economic activity will gain traction in Q3," he was quoted by PTI as saying.

The contraction in economic growth of Q1 is behind us and silver linings are visible, he further said, adding that the focus must shift from containment to reviving economy.

“Economic activity is stabilising in Q2 after 23.9 percent year-on-year decline in real GDP in Q1. Cushioned by government spending and rural demand, manufacturing gradually recovered in Q2. Agriculture outlook is robust. Merchandise exports (are) slowly catching up to pre-COVID levels.”
RBI

On Inflation

The RBI governor said that inflation is likely to ease to the projected target by Q4 of FY'21.

“Our assessment is that inflation will remain elevated in September but ease gradually towards the target over Q3 and Q4. Our analysis also suggests that supply disruptions, and associated margins and markups are the major factors driving up inflation.”
RBI Governor Shaktikanta Das, as quoted by ANI

The current inflation hump is transient, he added.

Meanwhile, the governor also announced during Friday’s briefing that the RTGS system for real-time fund transfer will become 24x7 from December.

The MPC, with the addition of three new external members, had commenced its meet on Wednesday.

The original schedule of the meeting was from 29 September to 1 October, but it had been postponed, as there were three vacant posts of external members in the MPC, which the government had to appoint.

(With inputs from PTI and ANI.)

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