11-02-2021 | 13:44 PM
Monetary Policy Committee 2021
Context
The Monetary Policy Committee of the central bank recently held its meetings from February 3 to February 5, 2021 to discuss the current macroeconomic financial developments in India.
Key Highlights
On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 4.0 %.
Consequently, the reverse repo rate under the LAF remains unchanged at 3.35 %and the marginal standing facility (MSF) rate and the Bank Rate at 4.25%.
The MPC also decided to continue with the accommodative stance as long as necessary to revive growth on a durable basis and mitigate the impact of the pandemic on the economy, while ensuring that inflation remains within the target.
The 10.5% real GDP growth in 2021-22 forecasted by RBI will move in the range of 26.2 to 8.3% in the first half and 6% in the third quarter of 2021.
The RBI has decided to restore the CRR in a non-disruptive manner from 3% to 4% in two stages by May 2021.
The RBI has proposed to allow small investors direct access to the G-Sec platform. G-Sec is a tradable instrument issued by the Central Government or the State Governments and is considered to be the safest form of investment.
These decisions of MPC are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
The committee highlights that the Inflation in the last two months was better than expected. Inflation has come down to the Upper tolerance level of 6 % for the 1st time since covid-19 pandemic breakdown.
Committee also highlighted factors which could change the food inflation trajectory include the Good Rabi Crop, Huge Kharif harvest, huge winter supplies of vegetables and soft poultry demand.
