economy

MPC minutes: Monetary policy set to get more challenging, says RBI governor

MPC minutes: Monetary policy set to get more challenging, says RBI governor

Uncertainty is emerging as the only certainty with which central bankers will have to deal with in the period ahead, said Reserve Bank of India (RBI) governor Shaktikanta Das, according to the minutes of monetary policy meeting released on Wednesday. RBI governor said given prevailing uncertainties, continued policy support is warranted for a durable, broad-based and self-sustaining rebound. As expected, the RBIs six-member Monetary Policy Committee (MPC) has maintained status quo on key interest rates in its December bi-monthly policy for the ninth consecutive time. The RBI has also held its ‘accommodative’ stance with five MPC members voting in favour of the same. The repo rate, at which the RBI lends short-term funds to banks, has been kept unchanged at 4% whereas the reverse repo rate, at which the RBI borrows from banks, remains the same at 3.35%. The Marginal Standing Facility (MSF) & Bank Rate also remain unchanged at 4.25%. Shaktikanta Das further said with monetary policy being at an inflection point, the journey of monetary policy which is hardly smooth in the best of times, is going to get more challenging going ahead. In the domestic front, even as the prospects for economic activity are improving, there is still a slack with key drivers like private consumption remaining well below their pre-pandemic levels. Given these uncertainties, continued policy support is warranted for a durable, broad-based and self-sustaining rebound, especially to nurture revival in sectors which are lagging and to safeguard those which are exposed to the evolving headwinds, Shaktikanta Das added. Meanwhile RBI deputy governor Michael Patra said India is being lashed by global spillovers. The main conduit has been financial markets so far but the channels themselves are diversifying. The biggest risk of contagion is now from the new variant. Unless a clearer picture emerges on the near-term outlook, we must take guard and resume battle readiness again. Further, Patra sees Indian economy treading a trajectory that diverges from the global situation. The level of GDP in Q2:2021-22 is barely at the so-called pre-pandemic level of Q2:2019-20, which itself grew at the slowest pace in 6 years preceding it. Consumption spending is held back by households hesitant to incur discretionary expenditure. Private investment remains timid and is yet to participate in the recovery. Download.

economy 2021-12-22 Livemint