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finance | IST

Who said what: Key takeaways from RBI's MPC minutes

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"Rapidly rising cases of COVID-19 is the single biggest challenge to ongoing recovery in the Indian economy. Learnings of last one year should, however, help us in managing the crisis as it unfolds," governor said.

Rapidly rising cases of COVID-19 is the single biggest challenge to ongoing economic recovery in India, said Reserve Bank of India (RBI) governor Shaktikanta Das during the monetary policy committee meeting, according to the minutes released on Thursday.
"Rapidly rising cases of COVID-19 is the single biggest challenge to ongoing recovery in the Indian economy. Learnings of last one year should, however, help us in managing the crisis as it unfolds," governor said.
The 27th meeting of the Monetary Policy Committee (MPC) had decided to leave benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, implying rate cuts in the future if need arises to support the economy hit by the COVID-19 pandemic.
Following the meeting of the key rate-setting body, the RBI reduced the key policy rate by 40 basis points, bringing it down to a historic low of 4 per cent.
All the six members of the MPC, including Das, were of the opinion that the impact of COVID-19 on the economy was more adverse than the initially expected as the lockdown was imposed with an aim to check the spread of the coronavirus pandemic, the minutes showed.
Shaktikanta Das
  • Clear signs of revival of growth in domestic economy.
  • Improving demand conditions, investment enhancing measures by govt impart upside to growth prospects.
  • Improving external demand imparts an upside to growth prospects.
  • RBI’s objective is to ensure orderly evolution of the yield curve, avoid volatility in G-sec market.
  • Going forward, RBI would continue to ensure ample surplus systemic liquidity.
  • Too early to give explicit time-based forward guidance.
  • Forward guidance in terms of securing a sustainable growth on a durable basis itself testifies to our commitment.
  • Commitment is to continue to mitigate COVID impact on economy, while ensuring that inflation remains within the target.
  • Need of the hour is to effectively secure economic recovery underway.
  • Need to continue to sustain the impulses of growth in the new financial year 2021-22.
  •  
    Michael Patra, DG, RBI
    • Risks to the recovery have become accentuated since the February meet.
    • Risks: new waves of infections, inexorably slow pace of vaccinations.
    • Risks: moderation in several high frequency sentiment indicators, global risks and spillovers.
    • Monetary policy has to remain supportive of economy until recovery is more sure footed.
    • Inflation expected to remain within range over a 12- month horizon.
    • Longer term inflation expectations remain broadly stable.
    •  
      Ashima Goyal
      • Growth uncertainty has increased with the second wave of COVID-19.
      • Even 10 percent growth most analysts expect for FY22 will barely take us to 2019 level.
      • We have to make up for lost time, alleviate widespread job loss, income stress.
      • Expected growth is high because of the base effect and does not imply sustained growth at potential.
      • Greater uncertainties require more flexibility for the MPC, support data-based guidance.
      •  
        Shashanka Bhide
        • Pace of recovery of output needed to offset the negative impact of the COVID shock will substantial.
        • Improvement in growth performance in 2H FY21 is fragile and will require strong policy support.
        • CPI inflation rate in the short run is projected at less than 5.3 percent in FY22, but risks remain.
        •  
          Jayanth Varma
          • Economic recovery remains uneven and incomplete.
          • Renewed jump in COVID infections has increased downside risk to growth momentum.
          • Inflation rates forecast to remain elevated for some time.
          • Balance of risk and reward is in favour of monetary accommodation.
          • Unfortunately forward guidance has failed to flatten the yield curve.
          • See little merit in persisting with time-based forward guidance.
          • In favour of state contingent guidance to support growth, maintain inflation within range.
          •  
            Mridul Saggar
            • Ramping up vaccination, testing & treatment holds key to protecting economic recovery.
            • Health policies have become the first line of defence.
            • Monetary and fiscal policies can only play a second fiddle.
            • Economic recovery is beginning to lose some steam.
            • Priority is to support growth from the possible shock from the second wave