Need to remain vigilant about Covid third wave, policy support needed from all sides: RBI Governor Shaktikanta Das

India needs to remain vigilant about the possibility of a third wave of Covid pandemic, Reserve Bank of India Governor Shaktikanta Das said on Friday, promising all policy support required to nurture the “nascent, hesitant” economic recovery, and seeking a similar support from the government.

With the focus remaining on fixing the nascent economic recovery, the RBI’s MPC left the key interest repo and reverse repo rates untouched for a seventh time in row at 4 per cent and 3.35 per cent, respectively. The MPC also decided on a 5:1 majority to continue with the accommodative stands as long as necessary to revive growth on a durable basis and continue to mitigate the impact of Covid-19.

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While it retained the economic growth forecast for the financial year 2021-22 at 9.5 per cent, on inflation, it said it could remain near the upper band of RBI'S target level upto July-September 2021, after which it could come down.

The RBI’s upper band for CPI inflation is 6 per cent.

“The recovery remains uneven across sectors and needs to be supported by all policy makers. The Reserve Bank remains in “whatever it takes” mode, with a readiness to deploy all its policy levers - monetary, prudential or regulatory. In seven parallels, our focus on preservation of financial stability continues. At this juncture, our overarching priority is that growth impulses are nurtured to ensure a durable recovery along a sustainable growth path with stability,” said Das while announcing the monetary policy decision.

Though he said India is in a much better position compared to June 2021, it needed to remain vigilant.

Domestic economic activity has started normalising with the ebbing of the second wave of the virus and the phased reopening of the economy. High-frequency indicators suggest that consumption (both private and government), investment and external demand are all on the path of regaining traction, said Das.

He said further easing of restrictions and increasing coverage of vaccinations are likely to boost private spending on goods and services including travel, tourism and recreational activities, propelling a broad-based recovery in aggregate demand. The robust outlook for agriculture and rural demand would continue to support private consumption. Urban demand is likely to accelerate with recovery in manufacturing and non-contact intensive services, release of pent-up demand and the pace of vaccination.

Although investment demand is still anaemic, improving capacity utilisation, rising steel consumption, higher imports of capital goods, congenial monetary and financial conditions and the economic packages announced by the Central government are expected to kick-start a long-awaited revival, the policy statement said.