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RBI expects GDP to contract 9.5% in FY21, holds rates steady

By Reuters

  • 09 Oct 2020
RBI expects GDP to contract 9.5% in FY21, holds rates steady
Credit: Reuters

The Reserve Bank of India left key interest rates unchanged on Friday as widely expected, while retaining an accommodative monetary policy stance to support the coronavirus-hit economy.

The RBI sees India's real GDP contracting by 9.5% in the ongoing fiscal year, and economic growth only turning positive in the final January-March quarter, RBI Governor Shaktikanta Das, in a webcast on Friday after a meeting of the monetary policy committee (MPC).

Barring the risk of a second wave of infections, the economy appeared poised to begin a recovery, Das said, noting food grain production was set for record highs and factories and cities were coming back to life.

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"Against all odds, we shall strive and revive," said Das, concluding the news conference.

The MPC as expected kept the repo rate, its key lending rate, at 4.0%, while the reverse repo rate or the key borrowing rate stayed at 3.35%. The central bank has slashed the repo rate by 115 basis points (bps) since late March.

The MPC meeting was originally due to conclude on Oct. 1 but had to be rescheduled as the government failed to appoint three new external members to the panel after their terms ended last month.

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Indian equities, rose slightly by 0.25% immediately after central bank's decision to hold rates steady, while the 10-year benchmark bond yield fell by 7 bps to 5.9630 and the rupee traded at 73.10 per dollar.

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