RBI Maintains Status Quo On Rates, Growth Projection

This was the fifth consecutive MPC meeting in which the RBI kept the key interest rate unchanged

RBI Maintains Status Quo On Rates, Growth Projection
RBI Maintains Status Quo On Rates, Growth Projection
Vishav - 07 April 2021

The Reserve Bank of India (RBI) on Wednesday decided to keep the policy rate unchanged at 4 per cent while also voting unanimously to maintain the accommodative stance, keeping room for future rate cuts. Meanwhile, the reverse repo rate also remained unchanged at 3.5 per cent.

This comes at a time when the economic recovery has been endangered by the sudden recent spike in the number of Covid cases, the pace of which has surprised many. This was the fifth consecutive Monetary Policy Committee meeting in which the RBI kept the key interest rate unchanged.

Rumki Majumdar, Economist, Deloitte India, said there are significant risks to inflation moving up, with intermittent supply-side disruptions and gradual demand revival keeping the pressure on prices, and hence the RBI is likely to continue holding the rates steady.

“The second wave of infection may set back the growth momentum, but we expect that to be temporary. Given that medical faculties are much better prepared than they were in the first lockdown, the spikes are limited to a few pockets, death rates are low, and the vaccine drive is getting intense, the economic impact of this wave will be limited to a quarter or two. Growth in 2021-22 will be a story of two halves, with economic activity picking up rapidly in the second half as a significant population gets vaccinated and we effectively bend the infection curve,” Majumdar said.

Anurag Mathur, CEO, Savills India said the real estate market, especially the affordable housing segment, would continue to benefit from the record low interest rates.

During the MPC announcement, RBI Governor Shaktikanta Das also retained the GDP growth forecast at 10.5 per cent for 2021-22.

“Though the overall growth prospects remain encouraging with a GDP growth rate expectation of 10.5 per cent in 2021-22, the ongoing economic revival is subject to the magnitude of the second wave of infections and localised lockdowns,” Mathur said.

Harsh Vardhan Patodia , President, CREDAI National, added that containing fresh infections and boosting vaccinations were the two important steps to counter the socio-economic fallout of the pandemic. “The pace of the vaccination drive must be increased manifold and should cover the younger population too. The real estate sector is one of the key drivers of the economy and needs multi-faceted support from the Central bank and the government to recover and bounce back to pre-Covid levels,” he said.