RBI Monetary Policy: GDP growth target retained at 9.5%; Inflation at 5.3 in FY22

The Reserve Bank of India (RBI) on Wednesday retained the GDP growth target at 9.5% in FY22. The Central bank kept its real GDP growth projection at 9.5 percent for the current fiscal consisting of 6.63% in Q3 and 6% for Q4. Real GDP growth for Q1 of 2022-23 is projected at 17.2% and at 7.8% for Q2 of 2022-23, said RBI Governor Shaktikanta Das. However, he also noted that CPI inflation remains to be an area of concern.

The Consumer Price Index (CPI) inflation is projected at 5.3% in 2021-22. This consists of 5.1% in Q3, and 5.7% in Q4 with risk broadly balanced. 

"The persistence of CPI inflation excluding food and fuel since June 2020 is an area of policy concern in view of input cost pressures that could rapidly be transmitted to retail inflation as demand strengthens," the Governor said. "Price pressures may persist in the immediate term. Vegetable prices are expected to see a seasonal correction with winter arrivals in view of bright prospects for Rabi crops."

Das noted that consumption demand has been improving and rural demand is showing resilience. Urban demand has also shown signs of strengthening. The recent cut in petrol and diesel prices will also support demand, he said. 

Repo rate remains unchanged at 4%

Meanwhile, the repo rate remained unchanged at 4% for the ninth consecutive time. RBI's Monetary Policy Committee (MPC) maintained a status quo on key rates and retained the repo rate despite concerns over the COVID-19 Omicron variant. Before this, the central bank had last revised the policy rate on May 22, 2020, where it cut the interest rate to a historic low.

"Monetary Policy Committee voted unanimously to keep the policy repo rate at 4% & the stance remains accommodative. MSF rate and bank rate remain unchanged at 4.25%. Reverse repo rate also remains unchanged at 3.35%," RBI Governor said in a press conference.

Furthermore, the RBI Governor said that the central bank was committed to its 'accommodative' stance in order to broaden growth impulses as he reiterated that the production of capital goods in the country is above pre-pandemic levels for the third month in a row.