BI holds rates but nflation forecast up

The Reserve Bank dia’s Monetary Policy Comee (MPC) reiterated its coment to reviving sustainable omic growth even as it d the inflation projection he current fiscal year to , an increase of 60 basis ts – one basis point is one redth of a percentage point mpared to the projection in ne meeting. ere is no doubt about what hinks is more important at point in time; RBI governor tikanta Das (he quoted Maruther King Jr in his comts) termed inflationary press “transitory”, and “driven dverse supply side factors” was unequivocal that “at stage... continued policy ort from all aides -- fiscal, etary, and sectoral -- is ired the nurture the nascent hesitant recovery.” nd the policy rate (at 4%) monetary policy stance have kept unchanged at 4% and accommodative.

The message is clear: RBI thinks growth is a concern, not inflation. It is not an assessment with which all analysts agree , not least because inflation has been stubborn.

The MPC resolution also put the onus of bringing down petrol-diesel prices on the union and state governments through tax reduction. While it has retained its 2021-22 GDP growth forecast of 9.5%, it has underlined demand side headwinds to the ongoing economic recovery. Experts have highlighted two facts -- a difference of views within MPC on the question of retaining the accommodative policy stance and the central bank announcing additional variable rate reverse repo auctions (which will take back some of the excess liquidity in the system) -- to argue that the monetary policy will see a gradual