RBI Governor Bats For Continued Policy Support Despite Rising Omicron Risk

Reserve Bank of India (RBI) governor Shaktikanta Das emphasised on continued policy support despite the growing concerns over the Omicron variant of Coronavirus pandemic, which were echoed by members of the bank's monetary policy committee (MPC), during their meeting held earlier this month to take a call on key lending rates.

According to the minutes of the MPC meeting, which was held between December 6-8, 2021, Mr Das said that uncertainty is emerging as the only certainty amid rising Omicron variant cases in the country and its possible impact on the economy.

All MPC members had unanimously decided to keep the repo and reverse repo rates unchanged after the three-days deliberations, held at RBI office in Mumbai.

During the meeting, the RBI governor said risks stalking the global economy have amplified with rapid spread of the virus mutations, including the Omicron variant, leading to countries scrambling for restrictions.

These developments, he said, certainly have two major takeaways for central bankers.

"First, uncertainty is emerging as the only certainty with which central bankers will have to deal with in the period ahead. Second, since monetary policy is at an inflection point, the journey of monetary policy which is hardly smooth in the best of times is going to get more challenging," he noted as per the minutes.

The Indian economy is facing several headwinds emanating from global factors – some old ones getting prolonged compared with the initial assessment, coupled with new ones, he noted.

He further said there is growing uncertainty regarding the evolving global macroeconomic outlook. On the domestic front, even as the prospects for economic activity are improving, there is still a slack with key drivers like private consumption remaining well below their prepandemic levels, Mr Das added.

"Given these uncertainties, continued policy support is warranted for a durable, broad-based and self-sustaining rebound, especially to nurture revival in sectors which are lagging and to safeguard those which are exposed to the evolving headwinds," the governor said.

All members of the MPC – Shashanka Bhide, Ashima Goyal, Jayanth R Varma, Mridul K Saggar, Michael Debabrata Patra and Shaktikanta Das – had unanimously voted to keep the policy repo rate unchanged at 4 per cent.

All members, except Mr Varma, had also voted 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 Coronavirus pandemic on the economy, while ensuring that inflation remains within the target going forward.

Mr Varma had expressed reservations on this part of the resolution.