The Reserve Bank of India during its Monetary Policy Committee announcements on Wednesday retained the GDP growth forecast at 10.5 per cent in FY22. RBI Governor Shaktikanta Das said, "The projection for real GDP growth for FY2021-22 is retained at 10.5 per cent, consisting of 26.2 per cent in Q1, 8.3 per cent in Q2, 5.4 per cent in Q3 and 6.2 per cent in Q4 of FY21-22."
The RBI Governor said that rural demand remains buoyant and record agriculture production for 2020-21 bodes well for its resilience. "Urban demand has been gaining strength on the back of normalisation of economic activity and should get a fillip with the ongoing vaccination drive," said Governor Das.
"The fiscal stimulus from increased allocation for capital expenditure under the Union Budget 2021-22, expanded production-linked incentives (PLI) scheme and rising capacity utilisation (from 63.3 per cent in Q2 to 66.6 per cent in Q3:2020-21) should provide strong support to investment demand and exports. Firms engaged in manufacturing, services and infrastructure polled by the Reserve Bank in March 2021 were optimistic about a pick-up in demand and expansion in business activity into 2021-22. Consumer confidence, on the other hand, has dipped with the recent surge in COVID infections in some states imparting uncertainty to the outlook," he said.
The apex bank in its policy meet decided to keep the repo rate unchanged at 4 per cent and reverse repo rate at 3.35 per cent. It also said that it will maintain an accommodative stance.
The Governor said that India's distribution programme and its effect on the ground are two major factors that will determine global economic recovery. Mitigation of inflation would depend on the supply side measures and easing of international prices. The RBI revised CPI-based retail inflation to 5 per cent in Q4 of FY21. "The projection for CPI inflation has been revised to 5 per cent in Q4 of 2021, 5.2 per cent, in Q1 of 2021-22, 5.2 per cent also in Q2 of 2021-22, 4.4 per cent in Q3, and 5.1 per cent in Q4 with risks broadly balanced," he said.
Also read: RBI pegs retail inflation at 5% for Q4 FY21