Central bank expands QE as growth seen faltering

The central bank expanded its version of quantitative easing (QE) to keep borrowing costs anchored, as economic growth is seen faltering because of a resurgent Covid-19 wave.

The Reserve Bank of India will buy an additional Rs 1.2 lakh crore ($16.4 billion) of bonds under the Government Securities Acquisition Program 2.0, governor Shaktikanta Das said in an online broadcast on Friday. The programme is aimed at keeping government borrowing costs anchored to ensure it can aid an economic recovery.

The monetary policy committee, which has been in a rate pause mode for more than a year, said it was retaining its accommodative policy for as long as necessary to revive and sustain growth on a durable basis, signalling there's still room to cut rates further.

"At this juncture, policy support from all sides is required to gain the momentum of growth," Das said.

The RBI's bond-buying programme aims to support the administration's borrowing plan, with the central bank buying sovereign debt to cap yields. It's already on course to acquire Rs 1 lakh crore of bonds in the current quarter.

A recovery in Asia's third-largest economy is in peril from a resurgent pandemic, which forced several states to impose lockdowns to check the virus spread. The movement and activity curbs are seen fanning inflation and hitting GDP, with many economists already cutting their growth forecasts for this fiscal year to single digits, from double digits previously..