Repo rate continues to be same, GDP growth for 2021 estimated as -7.5 %

Reserve Bank of India has announced that the main policy interest rates will continue to be the same for the third consecutive time as inflation and its outlook is at the peak and there are no clear indications of economic recovery presently.

The repo rate which is utilized by the banks taking loan from RBI is still the same, at 4 per cent, however, the Central Bank promised rate cuts as a part of the future plans to support the economy of the country affected by Covid-19.

Shakikanta Das, Governor, RBI, while announcing monetary policy, said, “Inflation is likely to remain elevated… This constrains the monetary policy at the current juncture from using the space available to act in support of growth.”

Though, RBI has updated the growth outlook with an increase to 7.5 %, contraction in the financial year 2020-21, which is contradictory to its October predictions of 9.5 % decline.

Sensex has been elevated record high to 45,000 for the first time post revised GDP forecast.Alongside, there is an increase in banking stocks.

Das revealed due to the impact of the Covid-19 induced pandemic, the commercial banks will refrain from giving out dividends this year and retain the profits.

Das further added, “The horizon has lighted up with a spate of positive news around vaccines and steady rise in recoveries. India’s time has come to break free of the fetters of Covid-19 and reconfigure our destiny.”

“The outlook for inflation has turned adverse relative to indications last two months. The MPC sees the inflation at 6.8% for Q3 (September-December) and 5.8% for Q4,” Das said stating the outlook had turned adverse.

For the month of October, the retail inflation elevated as high as 7.6 % on the back of surged food costs.

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