oppn parties MPC Says Inflation Transient, Holds Rates, Maintains Accommodative Stance

News Snippets

  • Supreme Court stays Karnataka HC order blocking operations of Kannada news channel Power TV. Says right to free speech must be "zealously protected" by courts
  • Opposition slams Centre for Samvidhan Hatya Diwas, says the Constitution is being murdered on daily basis under the present BJP government
  • Centre notifies June 25 as 'Samvidhan Hatya Diwas'. This was the date on which Indira Gandhi imposed the Emergency in 1975
  • Bengal moves SC against state governor for keeping 8 bills pending
  • Mamata Banerjee meets Uddhav Thackeray in Mumbai, says 'khela on' and promises to campaign for his party in the Maharashtra assembly elections
  • Stars and eminent persons from across the globe attend the wedding of Anant Ambani with Radhika Merchant at the Jio World Convention Centre in Mumbai
  • Controversial IAS trainee Puja Khedkar faces dismissal from service if her quato and disability claims are found false
  • SC says stay on bail should be in rare cases like terrorism or where order is perverse otherwise personal liberty and Article 21 will go for a toss
  • Supreme Court says judicial review of arrests by ED is necessary to check improper exrecise of power to arrest
  • Supreme Court grants interim bail to Arvind Kejriwal in the money laundering case in Delhi liquor policy case but he will remain in jail as he is under CBI detention in the corruption case in the same scam
  • Retail inflation rises to 5.1% in June, the highest in 4 months
  • Government to avoid merger of BSNL-MTNL. Instead, MTNL's operations will be shifted to BSNL to give the latter an all-India presence
  • Women's U-19 Asia Cup: India to clash with Pakistan on July 19
  • Paris Olympics badminton draws: P V Sindhu in easy group but gets a tough draw later while H S Prannoy and Lakshya Sen might clash in pre-quarter finals
  • After two consecutive wins, India look to seal series when they meet Zimbabwe in the 4th T20 today
BJP and allies win all 9 seats they contested in the Maharashtra Legislative Council poll
oppn parties
MPC Says Inflation Transient, Holds Rates, Maintains Accommodative Stance

By Ashwini Agarwal
First publised on 2021-04-08 05:31:46

The Monetary Policy Committee of the RBI has decided to maintain status quo and keep the key rates unchanged while continuing to maintain an accommodative stance despite inflation not being in the comfort zone. This, the MPC felt, is necessary to ensure the growth of the pandemic-ravaged economy. The MPC has rightly deduced that the inflation being witnessed now is temporary and is due to the high prices of commodities in the global market and logistic constraints. It feels that this cost-push inflation will subside once commodity prices ease, as crude prices have already started showing a downward trend.

The two other big issues that the MPC tackled was ensuring a fair amount of liquidity in the system and not allowing bond yields to rise to very high levels. The RBI has decided to buy Rs 1 lakh crore worth of g-sec from banks in the first quarter of FY 2022. This measure will keep bond yields in check while providing liquidity to banks. This will provide additional liquidity to banks to lend to priority sectors and boost growth.

The RBI has also decided to provide additional liquidity support to financial institutions such as NABARD, SIDBI and NHB in a series of specific measures. This will provide much-needed boost to agriculture, small enterprises and housing. The policy decision to provide credit to the agriculture sector will boost growth in the one sector that has consistently performed well despite lockdowns.

In another good move, the RBI decided to form a committee to work out the role and functions of asset management companies. This is a much needed reform as with a bad bank on the cards and the need to provide impetus to the IBC and resolution of stressed assets, it needs to be properly defined what role asset management companies will play in redeployment of such assets.