The Reserve Bank's Monetary Policy Committee (MPC) under Governor Shaktikanta Das will make its policy announcements at 10 AM today. Experts believe the policy rates are likely to remain unchanged, primarily due to high inflation levels for over five months now. Markets and economy watchers will be keeping a close eye on the outcome of the MPC meet as three out of six members joined this week delaying the MPC meeting by over a week. In today's announcement, the MPC will also give guidance on India's economic performance during the current fiscal so far even as the coronavirus cases are still hovering around 60,000 per day.
Here are the key things to know about the Reserve Bank's MPC meet announcements due today:
- The newly-constituted MPC began its three-day deliberations on Wednesday, amid expectations that the RBI will maintain status quo on the benchmark lending rates in view. The meeting of the six-member MPC, earlier slated for September 29 to October 1, was rescheduled as the appointment of independent members was delayed. The MPC must have a quorum of four.
- The government has appointed three eminent economists Ashima Goyal, Jayanth R Varma and Shashanka Bhide as members of the MPC headed by the RBI Governor. Of the total six MPC members, one (Ashima Goyal) is seen as a 'dove', while the other two belong to the 'neutral' camp. RBI Deputy Governor Michael Patra and Mridul Saggar are seen as 'hawks'.
- RBI Governor Shaktikanta Das will hold a press conference at 10 AM today. The MPC views on economic policy choices bear importance as India's growth is projected to shrink steeply in the current fiscal. The retail inflation has also been a worry for the RBI as it has remained above its target band -- +/- 4 per cent -- for five months now. As per the latest data, the retail inflation stood at 6.69 per cent in August, while it was from 6.73 per cent (revised from 6.93 per cent) in July.
- The COVID-19 pandemic has hit India's growth prospects the hardest. Most economic forecasts paint a grim picture of India's growth story for the financial year 2020-2021. The latest blow came from the World Bank, which said India's economy would shrink 9.6 per cent this fiscal in light of COVID-19 pandemic and subsequent lockdowns. The global agency said the country's economic situation is "much worse" than ever seen before.
- The MPC has reduced key lending repo rates by 250bps -- 1 bps is equal to 1 hundredth percentage point -- since February 2019 when the Shaktikanta Das joined as the RBI Governor. Das during his August review of the economic situation had said there's room for more rate cuts but advocated for judicious use of the "arsenal". "I also feel that we should wait for some more time for the cumulative 250 basis points reduction in policy rate since February 2019 to seep into the financial system and further reduce interest rates and spreads," he said. Since March when the first COVID-19 infused lockdown was imposed in India, the MPC has slashed repo rates by 115 basis points.
- In its August policy announcement, the MPC had decided to keep the key lending rate or repo rate unchanged at 4 per cent. Other rates were also kept unchanged while keeping the "accommodative" stance. The RBI Governor had said the global economic activity has remained fragile and that the surge in COVID-19 cases had subdued early signs of revival in the economy.