The Governor of the Reserve Bank of India, Shaktikanta Das, on Thursday said that the central bank estimated that India will grow at 7.8% next fiscal, that is financial year 2022-2033.
The announcement for the full year's growth estimate is lower than what the Economic Survey had to estimate this year, which puts next fiscal's growth to be between 8% - 8.5%.
Starting in April, it will be 17.2% in the first quarter, 7.0% in the second, 4.3% in the third and 4.5% in the fourth, assuming a normal monsoon this year.
This announcement came as part of the bi-monthly Monetary Policy Committee statement made by the RBI.
Further, in an announcement aimed to provide an impetus to the implementation of government schemes, the e-RUPI limit would be increased ten times, from the current ₹10,000 to ₹1 lakh, with a voucher to be made redeemable multiple times. e-RUPI was launched in August last year, Beneficiaries receiving e-RUPI based voucher get it as a QR code or a text message, which can be redeemed for a specific purpose. This was made to aid the government's direct benefit transfers, but it also has commercial applications.
Also Read: Explained: PM Modi Inaugurates e-RUPI, Here's How It Will Work
The RBI also kept its monetary policy stance as "accommodative", meaning that the central bank commits to keeping interest rates unchanged or take it lower. There were expectations that this stance would be changed to "neutral" amid growing inflationary concerns, where a central bank commits to either increasing or cutting rates.
Further, it kept all policy rates unchanged.
The marginal standing facility and bank rate remain unchanged at 4.25% The reverse repo rate also remains unchanged at 3.35% The repo rate is the rate at which the RBI lends to commercial banks on a short term basis. The reverse repo rate is the rate at which banks lend to the RBI, again on a short term basis. Several brokerages and research houses expected the RBI to increase the reverse repo rate by15 to 40 basis points. Generally, increasing interest rates is a tool to moderate inflation as it incentivises savings and increases credit costs for borrowers to ensure lesser spending.
One basis point is a hundredth of a percentage point.
Importantly, while the reverse repo rate remained unchanged, Das said the effective reverse repo rate had increased to around 3.37% last August to 3.87% now. The effective reverse repo rate is the weighted average of fixed reverse repo (which is commonly called the reverse repo rate) and the variable reverse repo (VRRR). Banks are permitted to park their excess liquidity under both. However, the limit on the former is ₹2 lakh crore, and beyond this, banks need to keep their funds with the RBI as the VRRR. Das said that VRRRs and variable repo rates (VRR) of 14-day tenors would be the main monetary policy tools under the prevailing liquidity conditions.
"Our monetary policy would continue to be guided by its primary mandate of price stability over the medium term, while also ensuring a strong and sustained economic recovery. As stated by me earlier, our actions will be calibrated and well-telegraphed", Das said.
The central bank has retained its projection of 5.3% consumer inflation for this financial year, and 4.5% for the next.
A regulatory change was also announced to attract investments in India's debt market. The RBI had, in March 2019, introduced the Voluntary Retention Route, which is a channel that let foreign portfolio investors invest in India governmental and corporate debt more easily in exchange for retaining a portion of their investment in India for a period of their choice. The limit on this scheme was ₹1.5 lakh crore, which is now being enhanced to ₹2.5 lakh crore.