As the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) met for its bi-monthly review last Friday, all stakeholders knew that signal interest rates would be left unchanged. In this context, normalization means moving from very low, ultra-supportive interest rates to a little higher but still low and supportive interest rates. The reason is that while low interest rates are required to support the pandemic-hit economy, real interest rates are negative. For Q1, that is, April-June 2021, growth is now projected higher at 21.4% against 18.5% projected on 4 June. Eventually, when required, there would be a repo rate hike, which is perceived as rate hike in the real sense.

Source: Mint August 10, 2021 20:03 UTC