Foreign reserves at all-time high of $620.576 Billion: RBI retains GDP growth target at 9.5%, keeps repo rate at 4%

The RBI Governor said the country is in a much better position than in June 2021, “but we need to remain vigilant on the possibility of a third wave.”

The Reserve Bank of India (RBI) governor Shaktikanta Das today announced the August bi-monthly monetary policy statement. As expected, the RBI has kept the repo rate unchanged at 4% for the seventh straight meeting. The Monetary Policy Committee (MPC) continues to maintain its ‘Accomodative’ stance. The reverse repo rate stands at 3.35%.

The central bank also decided to maintain an “accommodative” stance as the economy is yet to recover from the impact of the second Covid wave.

RBI has retained projections for real GDP growth at 9.5% for FY22. Real GDP for FY23 is projected at 17.2%, however, it ups the CPI inflation estimate for FY22 to 5.7% from 5.1%. “Recent inflationary pressures are evoking concerns, but the current assessment is that these are transitory,” the RBI governor said.

The statement follows the three-day review meeting of the six-member MPC which had begun on Wednesday. The majority of economists had expected RBI’s MPC to keep the key lending rate unchanged.

According to the Reserve Bank of India’s (RBI) weekly statistical supplement, the forex reserves also increased to record high of $620.576 billion from $611.149 billion reported for the week ended 23 July.

On a weekly basis, FCAs, the largest component of the forex reserves, edged higher by $8.596 billion to $576.224 billion. Similarly, the value of the country’s gold reserves increased by $760 million to $37.644 billion.

“Domestic economic activity has started normalising. High-frequency indicators suggest that private and government consumption, investment, external demand are all on the path of regaining traction. Global commodity prices and financial market volatility are downside risk to economic activity,” Das said.

The RBI Governor also said that the CPI inflation is projected at 5.7 % during 2021-22 – this consists of 5.9% in Q2, 5.3% in Q3 and 5.8% in Q4 of 2021-22 with risks broadly balanced. CPI inflation for the first quarter of 2022-23 is projected at 5.1%.

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