Reserve Bank projects GDP growth rate of 10.5% for FY 2021-22

New Delhi: The Reserve Bank of India (RBI) on Friday kept the repo rate and reverse repo rate unchanged at 4 per cent and 3.35 per cent respectively while continuing the accommodative stance.

The marginal standing facility rate and the bank rate too remain unchanged at 4.25 per cent, said RBI Governor Shaktikanta Das after the three-day meeting of the Monetary Policy Committee (MPC) which deliberated on the current and evolving macroeconomic and financial developments.

He said the Union Budget 2021-22 has provided a strong impetus for the revival of sectors like health and well-being, infrastructure, innovation and research. This will have a cascading multiplier effect going forward, particularly in improving the investment climate and reinvigorating domestic demand, income and employment.

“The Indian economy is poised to move in only one direction and that is upwards,” said Das. “It is our strong conviction backed by forecasts that in 2021-22, we will undo the damage that Covid-19 has inflicted on the economy.”

He said the real GDP growth is projected at 10.5 per cent in 2021-22 — in the range of 26.2 to 8.3 per cent in H1 and 6 per cent in Q3.

“The projected increase in capital expenditure augurs well for capacity creation and crowding in private investment, thereby improving the prospects for growth and building credibility around the quality of expenditure,” said the RBI governor.

At the same time, the projection for consumer price index (CPI) inflation has been revised to 5.2 per cent for Q4 FY21, 5.2 per cent to 5 per cent in H1 FY22 and 4.3 per cent for Q3 FY22.

Das said price stability is the foundation on which the economy can strive to reach its potential in a virtuous cycle of higher financial savings and investment; reduced uncertainties for firms in investment and wage decisions; reduced term and risk premia in financial markets; and increased external competitiveness.

“The RBI stands committed to ensure the availability of ample liquidity in the system and thereby foster congenial financial conditions for the recovery to gain traction,” he said.

Das said the new year 2021 has begun on a strong positive note with vaccination drives in major economies as well as in India. “While the year 2020 tested our capabilities and endurance, 2021 is setting the stage for a new economic era in the course of our history.”

The RBI Governor said retail investors can now directly participate in government securities. “This will broaden the investor base and provide retail investors with enhanced access to participate in the government securities market. This is a major structural reform placing India among select few countries which have similar facilities,” he said adding that details will be announced later.

The Centre and the RBI have taken several measures to encourage retail investment in government securities. These include the introduction of non-competitive bidding in primary auctions, permitting stock exchanges to route primary purchases and allowing a specific retail segment in the secondary market, Das said.