The Reserve Bank of India on Friday revised the real GDP growth projection for 2020-21 from -9.5% to -7.5%. The central bank had estimated GDP to shrink 9.5 percent in its previous assessment in October. RBI’s bullish stance pushed Indian equities to record highs as BSE Sensex crossed the 45,000 mark for the first time.
RBI Governor Shaktikanta Das also assured that the economy will witness positive GDP growth in the second half of the financial year. The revised projection comes in the context of the RBI’s decision to maintain an “accommodative” policy stance in its fifth bimonthly monetary policy for fiscal year 21.
Retail inflation in the country rose to its highest level in October in more than six years due to higher food prices. According to data from the Consumer Price Index (CPI) published by the Ministry of Statistics and Program Implementation, inflation stood at 7.61% in October, the highest level since May 2014.
The Reserve Bank of India (RBI) unanimously decided on Friday to keep key interest rates unchanged while maintaining an accommodative stance.
The Monetary Policy Committee (MPC) kept the policy buyback rate, the benchmark at which the RBI lends to banks, at 4%. The reverse repurchase rate will remain at 3.35%.
This year, the RBI slashed the buyback rate by 115 basis points, but an increase in consumer prices forced the panel to pause on recent policy reviews.
The MPC’s decision was expected as inflation has surprised to the upside, remaining above the upper tolerance level of 6 percent for seven months.
In the October review, the RBI had said it expected the economy to contract 9.5 percent in the year through March.
Retail inflation remained above 7 percent in October.
High-frequency indicators suggest that activity recovered in October due to festival demand and lower inventories. While some of those positives carried over into November, there are signs that demand is waning.
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