RBI forecasts 2020-21 GDP growth at 6%, keeps repo rate unchanged

RBI forecasts 2020-21 GDP growth at 6%, keeps repo rate unchanged

The Federal Reserve Bank of India (RBI) on Thursday kept the key repo rate unchanged 5.15 per cent in its first monetary policy review after Budget 2020-21.

The six-member Monetary Policy Committee (MPC) maintained an accommodative stance within the sixth bi-monthly policy meet of 2019-20. It estimated a 6 per cent GDP rate of growth for 2020-21 while projecting a 6.2 per cent rate of growth for Q3FY21.

The financial institution said it'll maintain an accommodative stance for as long because it is required to revive the economy. The committee also said that the economy continues to stay weak and therefore the output gap is negative.

All six members of Monetary Policy Committee voted in favour of maintaining established order on the key rate of interest . RBI's MPC was widely expected to stay rates unchanged thanks to rising inflationary rate and slow transmission of already announced rate of interest cuts.

As far as inflation cares , RBI anticipated it to stay elevated within the short-run which it remains "highly uncertain". it's revised the CPI inflation projection for Q4 of 2019-20 to six .5 per cent and 5.4-5 per cent within the first six months of 2020-21 and three .2 per cent within the third quarter of 2020-21.

Commenting on the February policy review, RBI Governor Shaktikanta Das said the repeat of established order in monetary policy shouldn't be seen as future policy action and it's several instruments at its command to tackle present economic challenges.

Explaining why the MPC chose to take care of established order , Das listed some points. He said global economic activity has not improved since the last bi-monthly policy review meeting.

He also listed problems like higher global inflation on the increasing demand for food prices aside from domestic issues like falling production and import of high-frequency capital goods, which are two key indicators of investments.

Das, however, listed several positives also . Improvement of commercial activity, better core industry performance and better rabi sowing are a number of them. But weak demand continued to affect key sectors like manufacturing in quarter 3 of 2019-20 though sentiment has improved, as far because the RBI's monetary policy statement.