India’s economic revival is official; RBI confirms recovery has begun, says watch out for this

By: |
February 6, 2020 12:05 PM

RBI MPC meet: The MPC decided to continue with the accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target.

RBI monetary policy, RBI MPC, repo rate, interest rate, rate cut, economic slowdownRBI MPC meet: RBI observed that the economy continues to be weak and the output gap remains negative. 

RBI Monetary Policy Committee: Amid high inflation and the green shoots of economic rebound, RBI maintained the status quo on interest rates by keeping it unchanged for the second consecutive MPC meet. “On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15 per cent,” RBI said in its statement. The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target.

The Reserve Bank said while some high-frequency indicators have turned around and pointed to a lift in the momentum of economic activity, there is a need to await incoming data to gauge their sustainability. Financial Express Online has been reporting about the early signs of the economic rebound that the RBI has confirmed today. However, the RBI MPC statement also said it has observed that the economy continues to be weak and the output gap remains negative.

Also Read: Has India’s economic slowdown bottomed out? Early indicators suggest green shoots of economic revival

In the resolution of the fifth bi-monthly MPC meet, the Reserve Bank said that it would prefer to wait and watch how the fiscal policy and monetary policy together perform on the ground. After the Union Budget 2020, all eyes were glued to RBI MPC meeting to see if the central bank will cut the interest rates for the sixth time in the last year.  

Also Read | Big relief for Indian economy: Five signs that show 2020 will be the year of rebound

Meanwhile, the RBI MPC, in 2019, cut rates five times in a row by a total of 135 basis points. In the previous meet, the committee had taken a pause on the repo rate cut in the last meeting owing to a surge in inflation. With rising inflation and lingering growth concerns, the RBI was expected to keep the status quo maintained as, in December, analysts had said.

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