RBI Keeps Policy Rates Unchanged; Repo Rate Remains at 4%
Moneylife Digital Team 06 August 2020
The six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) has decided to keep policy rates unchanged in its August review. Due to this, repo rate would remain at 4% and reverse repo rate at 3.35%.
In his video address, RBI governor Shaktikanta Das says, "Accommodative stance of the monetary policy would continue as long as necessary to revive growth and mitigate impact of corona virus (COVID19), while ensuring inflation remains within target going forward."

The RBI governor also applauded contribution from employees of banks and financial institutions for ensuring uninterrupted operations during the trying times of COVID19, while extending gratitude to all corona warriors.

As per the RBI governor, supply chain disruptions due to COVID-19 have persisted, with implications for food and non-food prices and food inflation outlook may improve with rabi crop harvest, especially if open market sales are public distribution operations are expanded, with higher procurement.

According to the RBI governor, the MPC has noted that recovery in rural economy is expected to be robust, buoyed by progress in kharif sowing. "While manufacturing firms expect domestic demand to recover gradually from Q2, consumer confidence has become more pessimistic in July," he added.

During the first half of 2020, global economic activity has remained fragile, while renewed surge in COVID-19 infection in major economies in July has subdued with early signs of revival which had appeared in May and June. Global financial markets have, however been buoyant, the central bank says.

"The MPC noted that in India too, economic activity had started to recover, but surges of fresh infections have forced fresh lockdowns, hence several high-frequency indicators have levelled off," Mr Das says, adding, "(the) MPC expects headline inflation to remain elevated in second quarter (Q2) of FY20-21, likely to ease in second half, aided by favourable base effects."

India's foreign exchange reserves have increased by $56.8 billion during April - July 2020, to $534.6 billion as on 31 July 2020, equivalent to 13.4 months of imports, the data from RBI shows.
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