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September 23, 2020

Monetary policy has its limitations, need structural reforms : RBI Governor

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  • Finance Minister Nirmala Sitharaman will present the budget on February 1, the challenge before the government to increase GDP growth
  • In view of the decline in GDP growth, the RBI had reduced the repo rate five times in a row last year.
  • RBI held interest rates steady in December, lowering GDP growth estimate from 6.1% to 5%


RBI Governor Shaktikanta Das says the monetary policy has some limitations, so they need structural reforms and financial measures to increase growth. Das says efforts should be given to food processing industries, tourism, e-commerce, startups and efforts to be a part of the global supply chain. He discussed this at the program at St. Stephen’s College in Delhi on Friday.

RBI Governor Shaktikanta Das says the monetary policy has some limitations

Das’s statement is seen in declining GDP growth and the coming budget. Growth in the September quarter fell to just 4.5%, its lowest in 6 years. Finance Minister Nirmala Sitharaman will present the budget on 1 February. The challenge before the government is to increase growth.

If the states also increase capital expenditure, there will be more impact: Das

The RBI governor says that the central government is focusing on infrastructure spending, which will increase the growth of the economy. But, states should also contribute to growth by increasing spending, this will have manifold effects. Das said it is a big challenge for the central bank to forecast the country’s potential growth. Despite this, they kept opinions in view of the demand, supply and inflation rate so that they can implement appropriate policies on time.

RBI took decisions in view of global uncertainties

Das said that in the last few months, the monetary policies of central banks around the world-changing because of changes in the growing trend in many countries. In view of this uncertainty, RBI also continuously changed its assessment. This helped in estimating the slowdown in the GDP growth of the country and reduced the repo rate to increase the growth.

They will hold the next RBI meeting on interest rates in February

Considering the slowdown in GDP growth, the RBI had cut the repo rate five times in a row last year by 1.35%. The December review held interest rates stable and projected annual GDP growth from 6.1% to 5%. The RBI maintained an approachable view of monetary policy. Further reduction in the repo rate is possible. The next meeting of the Monetary Policy Committee (MPC) of RBI will held on 4-6 February.

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