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RBI keeps repo rate unchanged 11th time in a row at 4%; cuts FY23 GDP to 7.2%

RBI on Friday kept the benchmark interest rate unchanged at 4 per cent and decided to continue with its accommodative stance despite rising inflation.

India TV Business Desk Written by: India TV Business Desk New Delhi Updated on: April 08, 2022 13:33 IST
RBI maintains status quo; leaves benchmark lending rate
Image Source : PTI (FILE)

RBI maintains status quo; leaves benchmark lending rate unchanged at 4%


Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday announced that the Monetary Policy Committee (MPC) unanimously decided to keep the key interest rates unchanged. This is the 11th time in a row when the RBI didn't change the key rates. Accordingly, the repo rate stands at 4 per cent. The reverse repo rate stands at 3.35 per cent.

This was the first meeting of the MPC, headed by RBI Governor Shaktikanta Das, in the current financial year. There were expectations that the MPC will retain the status quo on interest rates but change its monetary policy stance amid rising inflation on account of geopolitical developments.

Addressing the media while announcing the bi-monthly monetary policy review, Shaktikanta Das said that the rate-setting panel members unanimously agreed on not hiking the interest rate. 

In the last 10 meetings, the MPC left interest rate unchanged and also maintained an accommodative monetary policy stance. The repo rate or the short-term lending rate was last cut on May 22, 2020. Since then, the rate remains at a historic low of 4 per cent.

Uddhav Poddar, MD, Bhumika Group, said that RBI's decision to keep the repo rates unchanged in the current high inflation situation shows the government's commitment towards industry and growth. 

"It is a positive decision for the real estate sector and it will boost the economic recovery of the industry and create a conducive atmosphere for growth and increased investments,” Poddar said.

"It will bring favourable outcomes to the real estate sector and accelerates its recovery mode. The RBI's understanding approach will help in economic revival and tackling challenges. The real estate sector will be hugely benefitted from the unchanged repo rates and encourage a huge influx of buyers to invest in properties," Amit Jain, Director, Mahagun Group, said.

"The unchanged repo rate will provide more elbow room to the homebuyers and helps in the revival of the realty sector," Ravi Singh, vice President and head of ResearchShareIndia, said.

The central bank, however, revised its stance to less accommodative to revive, sustain growth and contain inflation. Das said that the Indian economy has been comforted by large forex reserves and that the central bank stands ready and resolute to defend the economy.

"Indian economy is steadily reviving from pandemic-induced slowdown," he said.

"RBI monetary policy is as expected, with the accommodative stance remaining in place. The outlook remains positive because the accommodative stance remains in place," Ravi Singhal, Vice Chairman, GCL Securities Limited 

RBI lowers growth forecast for FY23 

The central bank, however, slashed economic growth projection to 7.2 per cent for the current fiscal from 7.8 per cent estimated earlier amid volatile crude oil prices and supply chain disruptions due to the ongoing Russia-Ukraine war.

Das said external developments during the past two months have led to the materialisation of downside risks to domestic growth and upside risks to inflation.

"...real GDP growth for 2022-23 is now projected at 7.2 per cent with Q1:2022-23 at 16.2 per cent; Q2 at 6.2 per cent; Q3 at 4.1 per cent; and Q4 at 4 per cent, assuming crude oil (Indian basket) at USD 100 per barrel during 2022-23," Das said, adding that the Indian economy is steadily reviving from its pandemic-induced contraction.

Earlier this year, the Economic Survey in January had projected a growth rate of 8-8.5 per cent for the current fiscal.

RBI ups inflation target for FY23 

On inflation, Das said that the central bank has raised the retail inflation target for the current financial year to 5.7 per cent on the back of rising global prices amidst the ongoing geo-political tensions, even as it expected the prices of cereals and pulses to soften on prospects of good winter crop harvest.

"Inflation is now projected at 5.7 per cent in 2022-23 with Q1 at 6.3 per cent; Q2 at 5 per cent; Q3 at 5.4 per cent and Q4 at 5.1 per cent," he said.

In its earlier policy review in February, the RBI had projected retail inflation to be at 4.5 per cent in 2022-23.

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