The Reserve Bank of India (RBI) has maintained interest rates unchanged for the eighth time in a row, insisting that rates remain unchanged “until necessary to keep pace with growth.” The repo rate – the short-term lending rate to central banks – will remain unchanged at 4 per cent and the reverse repo rate at 3.35 per cent, RBI Governor Shaktikant Das said. Monthly Monetary Policy Committee (MPC) Review Meeting begins on Wednesday.
The central bank also maintained a ‘accommodation’ monetary position, i.e. the option to reduce or keep rates stable, depending on the growing situation.
When the Govt-19 epidemic first rocked the country, the Reserve Bank last cut its policy rates on 22 May 2020. The central bank has cut its key lending rate, the repo rate, by 115 basis points since March 2020.
RBI FY22 has maintained its GDP growth target of 9.5 percent. The central bank sees Q2FY22 GDP growth at 7.9 per cent, Q1FY23 GDP growth at 17.1 per cent and Q4FY22 GDP growth at 6.1 per cent.
Rating firm Moody’s recently raised India’s rating outlook from “negative” to “stable”. The global rating agency said the economic recovery was progressing as operations gradually grew and spread across sectors.
Fitch estimates, on the other hand, have lowered India’s GDP forecast for the current fiscal year to 8.7 percent from 10 percent in the previous June, mainly due to the second wave of corona virus outbreaks.
Meanwhile, India’s service sector expanded for the second month in a row in September, pushing companies to hire more staff for the first time in almost a year, with improved domestic demand and the easing of Govt-19 restrictions. The IHS Market Services Purchasing Managers’ Index fell to 55.2 in September from an August 18 high of 56.7, but was more than 50 comfortable separating growth from the contraction.