RBI Monetary Policy 2021
  • Recently, the Reserve Bank of India (RBI) has forecasted that real Gross Domestic Product (GDP), hit by the Covid pandemic in 2020-21, is expected to grow by 10.5% in 2021-22.
  • RBI had previously introduced a number of measures in its Monetary Policy Report for dealing with the Covid-19 induced economic setback.
Key Points

GDP Forecast:

  • The 5% real GDP growth in 2021-22 forecasted by RBI will move in the range of 26.2 to 8.3% in the first half and 6% in the third quarter of 2021.
  • Hit by lockdown and closures of industries, GDP had contracted by 9% in the June quarter of 2020-21 and fell by 7.5% in the September quarter of 2020-21.
  • Real GDP is a measurement of economic output that accounts for the effects of inflation or
  • The difference between nominal GDP and real GDP is the adjustment for Since nominal GDP is calculated using current prices, it does not require any adjustments for inflation.
Monetary Policy Committee

About:

    • The Monetary Policy Committee is a statutory and institutionalized framework under the Reserve Bank of India Act, 1934, for maintaining price stability, while keeping in mind the objective of growth.
Formation:
  • An RBI-appointed committee led by the then deputy governor Urjit Patel in 2014 recommended the establishment of the Monetary Policy Committee.
Chairman:
  • The Governor of RBI is ex-officio Chairman of the committee.
Members:
  • The committee comprises six members (including the Chairman) – three officials of the RBI and three external members nominated by the Government of India.
Decisions :
  • Decisions are taken by majority with the Governor having the casting vote in case of a tie.
Function:
  • The MPC determines the policy interest rate (repo rate) required to achieve the inflation target (4%).
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