Reverse Bank of India (RBI) had introduced a series of policy changes last year to help the countries get back on track and overcome the effects of the Covid-19 pandemic. One major step in this way was the decision to slash the repo rates- the rate at which it lends to commercial banks- in May 2020. However, over a year after the decision that put India on the course of its lowest interest rate, RBI Governor Shaktikanta Das has ruled out any near future plans to revise the decision.
Speaking to CNBC in an interview, Das said that Central had no plans to reverse the rate slashes despite the mounting concerns around inflation. The RBI Governor said that the Central Bank was closely monitoring the situation and will make a decision at the right time. However, he also believed that the time to take any decision had not come yet.
Das added that RBI will think of changing its decision course, once the economic revival starts showing signs of sustainability. He said that the Central Bank will announce any new policy after calibrating the situation and there were no plans to surprise the market with interest rate hikes.
The COVID-19 pandemic outbreak last year had forced the government to impose a lockdown and close down the country for months. This had a devastating impact on India’s economic growth and it showed a contraction of 67.3 per cent for the fiscal year ending March 31, 2021. And just when there were hopes and signs of revival, the second wave of the pandemic hit the country earlier this year. RBI had to cut its projected growth rate by 1 per cent bringing it to 9.5% for the next fiscal year.
Das said that the economic growth data suggested that there was a rebound of activity in parts of the economy like the manufacturing and non-contact heavy service sectors. However, the capacity utilisation of companies and sectors still had not recovered to the pre-pandemic level as yet.
The RBI Governor also addressed the concerns of inflation and emphasised that the current inflation in India appeared transitory and will show improvement. He further dismissed the concerns of India entering into stagflation- a stage where the country’s growth rate is low, the unemployment rate is high and commodity prices are rising.
Das said that RBI was fully aware of its role in anchoring inflation expectation and will take policy decisions according to the situation and time.
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