New Delhi: RBI’s monetary policy committee decided to leave the policy repo rate unchanged at 4 percent. The accommodative stance continues.
As part of the emergency response towards the pandemic, RBI has cut the key lending rate by 1.15 percent since March.
A rate cut was highly expected as the central bank tries to support an economy which is expected to contract this financial year.
While announcing the policy, RBI Governor Shaktikanta Das has expressed concern about the global economy. However, he said that the recovery has now started in the Indian economy. He said that from January to June this year, there has been concern about the economy.
The RBI governor said that retail is under inflation control. At the same time, the forex reserve has increased. As of July 31, the country’s forex reserve was $ 53460 million.
A 5 to 9 percent contraction in GDP (gross domestic product) is expected as per estimates from various experts. According to rating agency ICRA, the economy could contract by 9.5 percent in financial year 2020-21.
Those who oppose the rate cut are highlighting the rising inflation fears. The consumer price index (CPI)-based inflation for the month of June as per government data has worsened to 6.09 percent, exceeding RBI’s target, due to spike in the prices of certain food items. In March CPI was reported at 5.84 percent.
