India: RBI keeps key policy rates unchanged; retains GDP projection at 9.5%

  • Policy rates unchanged for 9th time
  • The RBI maintained status quo for 9th consecutive time in the backdrop of concerns over the emergence of the new coronavirus variant Omicron.
  • The reverse repo rate also remained unchanged at 3.35%, while the marginal standing facility (MSF) stands at 4.25%.
  • MPC voted unanimously for keeping interest rate unchanged and decided to continue with its accommodative stance as long as necessary to support growth and keep inflation within the target.
  • GDP projection retained at 9.5%
  • RBI retained its growth projection at 9.5% for the current fiscal despite concerns over Omicron.
  • 3QFY22 has been projected at 6.6%, for 4QFY22 it has been pegged at 6%.
  • Real GDP growth is projected at 17.2% for 1QFY23 and at 7.8% for 2QFY23.
  • The Reserve Bank retained the GDP growth forecast at 9.5% for the current fiscal but cautioned that the economic recovery is not yet strong enough to be self-sustaining and durable.
  • CPI inflation projected at 5.3% for FY22
  • This consists of 5.1% in 3QFY22, and 5.7% in 4QFY22 with risk broadly balanced.
  • Das said that price pressures may persist in the immediate term. Vegetable prices are expected to see a seasonal correction with winter arrivals in view of bright prospects for Rabi crops.
  • Projecting the inflation trajectory in line with its earlier estimate, the Reserve Bank of India (RBI) said the retail inflation is expected to be around 5.3% during the current fiscal year.
  • Cost-push pressures from high industrial raw material prices, transportation costs, and global logistics and supply chain bottlenecks continue to impinge on core inflation, he added.
  • The RBI governor said that recent reductions in excise duty & state VAT on petrol and diesel should support consumption demand by increasing purchasing power.
  • Govt consumption is also picking up from Aug 21, providing support to aggregate demand, he added. Launch of UPI-based mobile products
  • Notwithstanding some recent corrections, headwinds continue to be posed by Omicron, elevated international energy and commodity prices, potential volatility in global financial markets due to a faster normalisation of monetary policy in advanced economies, and prolonged global supply bottlenecks.
  • The RBI allowed banks to infuse capital in their overseas branches as well as repatriate profits without seeking its prior approval, subject to fulfilling of certain regulatory capital requirements. At present, banks incorporated in India can infuse capital in their overseas branches and subsidiaries, retain profits in these centres and repatriate/ transfer the profits with prior approval of the RBI.

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