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Last updated: 09 Feb, 2021  

RBI.Thmb.jpg Status quo on RBI rates

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Bikky Khosla | 09 Feb, 2021

The RBI, as expected, last week kept its key rates unchanged along with a growth-oriented accommodative stance. The repo rate, or short-term lending rate, for commercial banks, was maintained at 4 percent. On the growth front, the central bank chief said that the outlook has improved significantly with positive impulses becoming more broad based. He also expressed optimism over the ongoing vaccination drive and reviving consumer confidence.

The RBI move is not at all surprising, considering the fiscal situation of the economy. Our fiscal deficit for the April-December 2020-21 period stood at Rs 11.58 lakh crore, or 145.5 per cent of the budget estimates, and although during the current situation fiscal deficit is something that one cannot escape, it would be unwise to loosen the budget purse strings too much. The Finance Minister has recently said that the Centre is taking steps to carefully monitor the fiscal deficit situation.

Meanwhile, India's exports rose over 5.37 per cent on a year-on-year basis, to $27.24 billion in January from $25.85 billion in January 2020. The value of non-petroleum exports rose by 11.37 per cent over January 2020 to $25.24 billion. Additionally, it is encouraging to see that almost all major export category products showed impressive growth. It is also noteworthy that the traditional and labour-intensive sectors of exports did well in the month, signalling to better days ahead for MSME exports.

During the ongoing pandemic situation, most of our small and medium scale exporters are witnessing cash flow issues, along with lack of adequate funds. In this situation, it is of utmost importance that the government focus on lessening the burden of the sector by taking some long pending decision like notifying of the RoDTEP rates, release of required funds for RoDTEP, clarification on SEIS benefits, allocation of funds for NIRVIK scheme, etc. Such moves will definitely help the sector in this difficult time.

I invite your opinions.
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