The Reserve Bank of India (RBI) on Friday announced that the policy repo rate has been slashed by 40 basis points to 4 per cent. The decision was informed by RBI Governor Shaktikanta Das after the central bank advanced its monetary policy committee meeting in view of the COVID-induced lockdown.
Six members of the monetary policy committee voted 5:1 in favour of 40 bps cut in interest rate, Das said.
The RBI also cut the reverse repo rate to 3.35 per cent. The central bank will continue to maintain an accommodative stance.
The RBI has predicted that the GDP growth in 2020-21 will be in the negative territory. "India seeing collapse of demand; dip in electricity, petroleum product consumption; fall in private consumption," the governor said.
"Private consumption has seen the biggest blow due to COVID-19 outbreak. Investment demand has halted. Government revenues have been impacted severely due to slowdown in economic activity amid COVID-19 outbreak," said Das.
Headline inflation may remain firm in the first half of the year. This will, however, ease in the second half, falling below 4 per cent in the third or fourth quarter of the current financial year. "Inflation outlook highly uncertain. Elevated level of inflation in pulses worrisome, it requires review of import duties," Das added.