Enduring Inflation: RBI to keep at fanning growth despite Price Rise

According to Governor Shaktikanta Das, economy is recovering from set back from the Covid’s second wave.
Shaktikanta Das

Mumbai, Aug 6 : Terming short term supply side shocks as the main drivers of inflation, Reserve Bank of India (RBI) Governor Shaktikanta Das, cautioned against departure of growth oriented stance.

Accordingly, RBI Governor Shaktikanta Das, said that any departure from the present pro-growth monetary policy stance might “kill the nascent and hesitant recovery.”

He reiterated RBI’s priority to “promote growth within the framework of financial stability.”

Consequently, despite the inflationary pressures, RBI’s Monetary Policy Committee (MPC) voted to maintain the status quo on key policy interest rates and continued with growth supportive policy stance.

As per RBI’s revised estimates, forecasts for FY22 raised inflation projection to 5.7 per cent from the earlier 5.1 per cent given the supply side overhang seen in the first quarter of the year.

Nevertheless, RBI said that the inflationary pressures are transitory in the backdrop of supply side constraints and a spurt in commodity prices.

Besides, the central bank labelled the present situation as ‘extraordinary’.

It further termed growth impulses as ‘relatively weak’ and ‘nascent’ investment demand.

Resultantly, MPC unanimously voted to maintain the repo rate, or short-term lending rate, for commercial banks, at 4 per cent.

Likewise, the reverse repo rate was kept unchanged at 3.35 per cent, and the marginal standing facility (MSF) rate and the ‘Bank Rate’ at 4.25 per cent.

In addition, the RBI retained the FY22 projection for real GDP growth at 9.5 per cent on the back of receding impact of Covid second wave as well as rising vaccinations.

According to Governor Shaktikanta Das, economy is recovering from set back from the Covid’s second wave.

He said that accelerated vaccination drive along with, buoyant exports and monetary as well as fiscal support has aided recovery.

Total
1
Shares
Related Posts