Reserve Bank of India chief Shaktikanta Das on October 9 said that the mood of the nation is shifting from despair and fear to hope, adding that GDP growth may turn positive by the fourth quarter. "The deep contraction of quarter one is behind us, the silver lining in visible," the RBI chief said while announcing the policy decisions of the Monetary Policy Committee.
The rural economy looks resilient despite the covid pandemic, Das said, adding that there is an expectation of three-speed recovery in economic activity, with variation among the sectors.
The central bank has projected FY21 GDP contracting by 9.5%. "Real GDP in 2021 is likely to decline by 9.5 per cent but speedy rebound is anticipated," Das said.
RBI expects inflation to reduce in the third and fourth quarter as supply eases. The monetary policy committee has decided to the look through the current inflation as a transient phase, the RBI chief said.
The MPC said that the agricultural sector emerged as a bright spot and its prospects have strengthened on the back of good spatial and temporal progress of the south-west monsoon.
The newly appointed monetary policy committee of the RBI today kept the repo rate unchanged at 4%. The RBI has far slashed rates by 115 basis points so far this year to stabilise the economy amid the ongoing COVID-19 pandemic.
This is the first meeting of the newly formed Monetary Policy Committee which comprises Ashima Goyal who is currently a member of Indian Prime Minister Narendra Modi's economic advisory council, Shashanka Bhide, a senior advisor at the National Council for Applied Economic Research, Jayanth Varma, a finance and accounting professor at the Indian Institute of Management, Ahmedabad, Michael Patra, deputy governor of RBI, Mridul Saggar, executive director of RBI and governor Shaktikanta Das.
Analysts say that the central bank must manage high retail inflation while keeping policy accommodative to support an economy which contracted 23.9% last quarter, the weakest performance on record.