MPC meet: RBI retains GDP projection at 9.5% for FY22

Governor Shaktikanta Das during the Monetary Policy Committee meet announcements on Friday projected GDP growth at 9.5 per cent for FY22. The apex bank has projected the GDP growth for 2021-22 quarters as follows: 21.4 per cent in Q1, 7.3 per cent in Q2, 6.3 per cent in Q3, and 6.1 per cent in Q4.

Governor Das said that economic activity has started to recover with the ebbing of the second wave. “Domestic economic activity is starting to recover with the ebbing of the second wave. Looking ahead, agricultural production and rural demand are expected to remain resilient. Urban demand is likely to mend with a lag as manufacturing and non-contact intensive services resume on a stronger pace, and the release of pent-up demand acquires a durable character with an accelerated pace of vaccination,” he said.

Buoyant exports, pick-up in government expenditure including capital expenditure and the recent economic package by the government will provide further impetus to aggregate demand, said the Governor.

“Although investment demand is still anaemic, improving capacity utilisation and congenial monetary and financial conditions are preparing the ground for a long-awaited revival. Firms polled in the Reserve Bank surveys expect expansion in production volumes and new orders in Q2:2021-22, which is likely to sustain through Q4. Elevated levels of global commodity prices and financial market volatility are, however, the main downside risks. Taking all these factors into consideration, projection for real GDP growth is retained at 9.5 per cent in 2021-22,” said the Governor.

The apex bank also kept repo rate unchanged at 4 per cent, and reverse repo rate at 4.25 per cent. “The MPC also decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy,” the RBI said.

Also read: Shaktikanta Das keeps repo rate unchanged at 4%, maintains accommodative stance