The RBI’s Monetary Policy Committee (MPC) conducted its 3rd bi-monthly monetary policy meeting for
FY21-22 from 4-6, August 2021.
On the basis of an assessment of the evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to:
Part A: RBI’ s Policy decision Rationale:
Headline inflation surprised on the upside in May’21 at 6.30%, reflecting a combination of adverse supply shocks, elevated logistics costs, high global commodity prices and domestic fuel taxes. In Jun’21, headline inflation remained above the upper tolerance level at 6.26%, but price momentum moderated. Also, core inflation softened from its peak in May’21 of 6.6%. International crude oil prices remained volatile; any moderation in prices as a consequence of the OPEC plus agreement could contribute towards alleviating inflation pressures.
The MPC expects CPI outlook to be subjected to both upside and downside pressures such as:
Based on the above factors, the MPC has provided the following outlook for CPI Inflation, with risks broadly balanced:
|CPI Inflation Outlook||Projections|
|3rd bi-monthly policy FY22||5.90%||5.30%||5.80%||5.10%||5.70%|
|2nd bi-monthly policy FY22||5.40%||4.70%||5.30%||-||5.10%|
The MPC expects growth outlook to be driven by the following factors:
Based on the above factors, the MPC has provided the following outlook for Real GDP growth:
|GDP Growth Outlook||Projections|
|3rd bi-monthly policy FY22||21.40%||7.30%||6.30%||6.10%||17.20%||9.50%|
|2nd bi-monthly policy FY22||18.50%||7.90%||7.20%||6.60%||-||9.50%|
4. Global Economy
Global economic recovery which had gained growth momentum has started to moderate due to resurgence in pandemic, driven by new variants. Most advanced economies with high vaccination density and policy stimulus showed strong growth rebound, whereas other economies remained subdued in terms of growth due to ongoing risk of new infections. Recent OPEC+ decision to increase supply will provide some relief to inflation concerns. Yields in most advance economies softened. Emerging market economies, on the other hand, remained elevated on country-specific factors. In the foreign exchange market, EME currencies depreciated in the wake of portfolio outflows since mid-June as risk appetite ebbed, while the US dollar has strengthened.
Part B: Key Statements on Developmental and Regulatory Policies:
1. On Tap TLTRO Scheme – Extension of Deadline
RBI has extended the TLTRO on Tap Scheme, which was previously available up to Sep 30, 2021, by a period of three months, i.e., till Dec 31, 2021.
2. Marginal Standing Facility (MSF) - Extension of Relaxation
RBI has extended the MSF relaxation, which was previously available up to Sep 30, 2021, by a period of three months, i.e., till Dec 31, 2021.
The next meeting of the MPC is scheduled during Oct 06 - Oct 08, 2021.