The RBI last week retained the repo rate during the sixth and final monetary policy review of FY22. The short-term lending rate for commercial banks has been maintained at 4 percent. The central bank has also decided to continue with the accommodative stance ‘as long as necessary’ to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

The decision sounds quite logical. The economic recovery is still uneven and the new Covid-19 variant has dented the sentiment. The MPC also noted that inflation is likely to moderate in first half of 2022-23 and move closer to the target rate thereafter, providing room to remain accommodative. It also added that timely and apposite supply side measures from the Government have substantially helped contain inflationary pressures and the proposed Budget measures should boost aggregate demand.

On domestic growth, the RBI has projected the real GDP growth at 7.8 percent for the next financial year. On the negative side, it raises concern over the yet-to-be broad-based economic activity with pre-pandemic level private consumption, but on the positive side, it has pointed out to factors like better Rabi crop outlook, relatively low impact of the third wave of pandemic, Budget proposals to enhance capital expenditure, pick-up in non-food bank credit, improvement in merchandise exports, etc.

Meanwhile, according to latest figures, lower prices of manufactured goods and a slight dip in fuel cost eased January 2022 wholesale inflation to 12.96 percent last month from 13.56 percent reported for December 2021. In contrast, retail inflation rose to 6.01 percent from 5.66 percent in December 2021. It is also noteworthy that subdued manufacturing growth eased January industrial output. The central bank will definitely keep a constant eye on these major indicators.

I invite your opinions.