RBI predicts FY21's real GDP-growth at -7.5%; repo rate unchanged
What's the story
On Friday, the Reserve Bank of India revised the real GDP growth projection for 2020-21 to -7.5%, after initially predicting that it would be -9.5%. At a press meet, Governor Shaktikanta Das said the country's economy was recovering faster, and more and more sectors were contributing toward the revival. RBI also decided to keep the repo rate unchanged, for a third consecutive time, at 4%.
Details
Reverse repo rate also remained the same at 3.35%
The reverse repo rate also remained unchanged at 3.35%. "The Marginal Standing Facility (MSF) rate and the bank rate remain unchanged at 4.25%," Das added. To note, the repo rate is the rate at which RBI lends money to commercial banks whenever a shortage of funds arises. The repo rate is also used to control inflation — RBI increases the rate to lower inflation.
Economy
Coronavirus pandemic and the lockdown adversely affected economy
The economy was battered by the coronavirus pandemic, with the strict lockdown spelling doom for almost all sectors. In May, in a bid to provide respite to the country, Prime Minister Narendra Modi announced the Aatmanirbhar Bharat package of Rs. 20 lakh crore. RBI also took a number of measures and Das indicated today that those steps would continue for some time.
Statement
RBI will maintain current stance to help revive growth
At the press meet, Das informed that MPC decided to continue with its "accommodative stands of monetary policy at least till the current financial year and into next year to revive growth on a durable basis and mitigate the impact of COVID-19 while ensuring that inflation remains within the target." In fact, economists had also predicted that the status quo will remain unchanged.
What he said
Urban demand is gaining momentum, disclosed Das
About the revival of India's economy, Das said, "The recovery in rural demand is expected to strengthen further while urban demand is also gaining momentum." He claimed the business sentiment of manufacturing firms was also improving and that consumers remained optimistic. "We have lost lives and loved ones, but not hope. Not the conviction that we will overcome and emerge stronger," Das asserted.
Quote
"India's time has come"
"The horizon has lighted up with a spate of positive news around vaccines and a steady rise in recoveries. India's time has come to break free of the fetters of COVID-19 and reconfigure our destiny," the governor of the country's apex bank said.
Change
Limit for contactless payment raised to Rs. 5,000
Das also disclosed that from January, the limit for contactless cash transactions will be Rs. 5,000. It stands at Rs. 2,000 currently. He also revealed that financial markets were working in an orderly fashion while assuring that RBI is committed to preserving the interest of depositors. The markets reacted jubilantly after Das' announcements as Sensex touched 45,000 for the first time.