India keeps key policy interest rates unchanged to strengthen fragile economic recovery

The Reserve Bank of India (RBI) has kept the key benchmark rates unchanged for the eighth consecutive time and promised to maintain the status-quo on rates "as long as necessary to revive growth." 
 
"The repo rate is unchanged at 4%. The reverse repo rate is steady at 3.35%," said the RBI Governor Shaktikanta Das at the end of the bi-monthly Monetary Policy Committee (MPC) review meeting that started on Wednesday, reports NDTV. 
 
Key things to know about the RBI policy announcement
 
The Reserve Bank also retained an 'accommodative' monetary policy stance i.e.willingness to either cut the rates or keep them steady, depending on the evolving situation.
 
The central bank last cut its policy rates on May 22, 2020, in an off-policy cycle when the covid-19 pandemic first shook the country. The Reserve Bank has slashed its key lending rate i.e. repo rate by 115 basis points since March 2020 to cushion the economy from the aftershock of coronavirus.
 
RBI Governor Shaktikanta Das has retained real GDP growth projection at 9.5% for FY2021-22, while highlighting that high-frequency indicators show that economic activity has gained momentum in the second quarter
 
Recovery in demand gathered pace in August-September, and pick-up in import of cap goods point to some recovery in activity, Shaktikanta Das pointed out.

The Governor expressed confidence that pent-up demand and festival season should further boost urban demand, He, however, cautioned that economic output is still below pre-covid levels.

Rating agency Moody's had recently upgraded India's rating outlook to "stable" from "negative." The global rating agency said economic recovery is in progress as activity is gradually picking up and spreading across sectors.

On inflation, the RBI Governor Shaktikanta Das projected CPI inflation at 5.3% for the current year and asserted the central bank will ensure inflation remains within the target range, which is 2-6%.

Meanwhile, India's services industry expanded for a second straight month in September, bolstered by improved domestic demand and easing Covid-19 restrictions, pushing companies to hire more employees for the first time in nearly a year.

The IHS Markit Services Purchasing Managers' Index eased to 55.2 in September from August's 18-month high of 56.7, but stayed comfortably above the 50-mark separating growth from contraction.

India in a much better place today than at the time of the last MPC meeting; the growth impulses are strengthening and inflation trajectory is more favourable than expected, Shaktikanta Das concluded.