Categories: Business

RBI sees inflation rises, but accommodates tariffs to encourage growth

The Reserve Bank of India (RBI) on Friday maintains a major interest rate that has not changed and the monetary policy panel vows to survive with an easy attitude as long as it is necessary to revive and maintain growth and continue to reduce the impact of Covid on the economy.
The Monetary Policy Committee (MPC) decided to maintain the level of the policy repo (the level in which the RBI lends money to commercial banks) has not changed at 4%.
It also maintained GDP estimates for 2021-22 at 9.5%, while raising inflation estimates to 5.7%, stating that he predicted pressure to facilitate the price in front of the arrival of Kharif plants and the impact of the supply side steps.
This was the seventh consecutive meeting when RBI kept interest rates unchanged.
“The prospect for aggregate demand increases, but the underlying conditions are still weak.
The aggregate supply is also lagging behind the pre-pandemic level.
While a few steps have been taken to facilitate supply constraints, more need to be done.
Recent inflationary pressure arouses worries; But the current assessment is that these pressures are temporary and most are driven by adverse supply side factors, “said the Governor of RBI Shaktikant Das in his policy statement.
“The implementation of monetary policy during a pandemic has been directed to maintain pleasant financial conditions that maintain and rejuvenate growth.
At this stage, therefore, advanced policy support from all sides – fiscal, monetary and sectoral – is needed to maintain newborn recovery and doubtful -Ragu, “said Das.
The implication for the borrower is that there is not much of the scope of interest rates to go down, except for some pass from previous cuts by lenders.
The RBI has cut the repo level of 250 basis points (1% = 100bps) since February 2019 and the bank has responded with a cumulative decline of 217-BPS at a weighted average loan rate.
DAS said that the country was in a much better position than in June 2021 but suggested caution.
“The requirement is not to drop our guards and to remain vigilant about all possible third waves, especially in the background of increasing infection in certain parts of the country,” he said.
Announced MPC’s decision, DAS said that members unanimously maintained the repo level at 4%.
However, one member, J R Varma, voted on the proposal to continue with an ‘accommodating’ attitude.
“The decision to maintain the repo level does not change along with maintaining an accommodating attitude is on the expected path because low interest rates are very important for economic revival,” said SS Malikarjuna Rao, MD & CEO, Punjab National Bank.
In its interaction with the media, the watershed said that the new variable level reverses the repo that can absorb most liquidity instead of the opposite of the accommodating phase.

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