RBI Monetary Policy (As on 8th December, 2021)

The RBI’s Monetary Policy Committee (MPC) conducted its 5th bi-monthly monetary policy meeting for FY21-22 from
6-8, December 2021. On the basis of an assessment of the evolving macroeconomic situation, the Monetary Policy
Committee (MPC) at its meeting today decided to:
 Kept the Repo Rate unchanged at 4.0%.
 Accordingly, the Marginal Standing Facility (MSF) rate and the Bank Rate stand unchanged at 4.25%.
 The Reverse Repo Rate under the LAF stands unchanged at 3.35%.
 GDP growth for FY22 retained at 9.5%.
 Inflation projections for FY22 retained to 5.3%.
 Accommodative stance to continue, with a 5-1 vote.

Latest
Policy Rates Previous Policy Action
(as on 8th December, 2021)
Repo Rate 4.00% 4.00% No Change
Reverse Repo Rate 3.35% 3.35% No Change
Marginal Standing Facility Rate 4.25% 4.25% No Change
CRR 4.00% 4.00% No Change
SLR 18.00% 18.00% No Change

Key Highlights:
1) Growth is a priority

Highlighting the need to spur private investment, the RBI governor cited flagging private investment in his
reasoning for continued accommodation in monetary policy. Mr Das inferred the need to see visible growth in
private investment to confirm the growth trajectory rather than focusing on consumption metrics which,
according to the RBI are relatively volatile metrics of growth. High frequency indicators, investment activity, PMI
and exports have displayed strength in recent months. While rural demand is expected to be resilient, urban
demand will continue to bolster due to surge in contact-intensive activities and pent-up demand.

2) Liquidity: Normalisation continues in an orderly manner

Liquidity conditions remained in large surplus, with daily absorptions through the fixed rate reverse repo and the
variable rate reverse repo (VRRR) operations under LAF at Rs 8.6tn in October-November. Reserve money
expanded by 7.9% as on 3rd December. Money supply and bank credit grew by 9.5% and 7% respectively as on
19th November. India’s foreign exchange reserves increased by US$ 59bn in FY22 (till 3rd December) to US$ 636bn.

3) Inflation

Going ahead, inflation outlook will be guided by

 Reversal in vegetable price hike with winter arrivals.
 Strong rabi sowing that is set to exceed last year’s acreage.
 Supply side interventions by government to control edible oil prices.
 Significant correction in crude prices in recent period.
 Cost push pressures from high industrial raw material prices, transportation costs, global logistics and supply
chain bottlenecks.
Taking the above factors into consideration, CPI inflation retained at 5.3% in FY22, 5.1% in Q3, 5.7% in Q4, 5% in
Q1&Q2FY23.

The next meeting of the MPC is scheduled during 07th Feb - 09th Feb, 2022.

Source: RBI MPC as on 8th December’21

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Source: RBI MPC as on 8th December’21