RBI keeps policy repo rate unchanged at 4%, GDP growth projected at 10.5% in FY 2021-22

New Delhi, Feb 05: In line with the Union Budget, the Reserve Bank of India (RBI) on Friday decided to leave benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, implying rate cuts in the future if need arises to support the economy hit by the COVID-19 pandemic.

The RBI aslo projected a GDP growth rate of 10.5 per cent for the financial year beginning April 1, on the back of recovery in economic activities.

"Central bank to maintain accommodative monetary policy stance to support growth, keep inflation at targeted level," Governor Shaktikanta Das said. "Inflation has returned to tolerance band of 4 per cent, he said.

It may be recalled that the committee kept the interest rates unchanged in its last three reviews, maintaining repo rate at four per cent and the reverse repo rate at 3.35 per cent. The RBI had last revised its policy rate on May 22 last year; to perk up demand by cutting interest rate to a historic low.

With regard to inflation, RBI Governor Shaktikanta Das said vegetable prices are expected to remain soft in the near term as the central bank projected retail inflation rate to come down to 5.2 per cent in the current quarter and progressively decline to 4.3 per cent by the third quarter of the next fiscal.

He said the growth outlook has improved significantly and the vaccination drive will help the economic rebound.

Das further said the economy will rebound to 10.5 per cent in the next financial year.

After the Budget 2021-22 announcement on Monday, Economic Affairs Secretary Tarun Bajaj had said that real GDP growth would be 10-10.5 per cent in the next fiscal.

"Our revenue figure is under-stated not overstated. We have taken nominal GDP at 14.4 per cent and revenue growth at 16.7 per cent. So, the buoyancy is only 1.16. We are hopeful we will get more than this. We will definitely be within 6.8 per cent and could be lower also," Bajaj had said.

The RBI Governor further said that the government will be reviewing the inflation target by March end.

The Monetary Policy Committee headed by the RBI Governor has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2021, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.