The Monetary Policy Committee kept the repo and reverse repo rates unchanged at 4.0% and 3.35%, respectively, while projecting a CPI inflation of 4.5% for 2022-23. India's GDP for 2021-22 grew by 9.2%, exceeding pre-pandemic levels, with a projected real GDP growth of 7.8% for 2022-23 amidst global economic uncertainties. Continued policy support is necessary to drive domestic recovery and keep inflation within target levels.

1. - Yash Gupta
(Associate: Research and Analyst)
ALL ABOUT
MONETARY
POLICY
STATEMENT,
2021-22
FEBRUARY 08-10, 2022

2. • Monetary policy committee(MPC) kept Policy repo
rate and reverse repo rate under the liquidity
adjustment facility (LAF) unchanged at 4.0 &
3.35%
• The Bank rate decided by the MPC was fixed at
4.25%.
• CPI inflation edged up to 5.6 per cent y-o-y in
December from 4.9% in November due to large
adverse base effects.

3. • The MPC has an objective to achieve medium term target
for consumer price index (CPI) inflation of 4 per cent in
order to revive and sustain growth on durable basis and
to mitigate the impact of COVID-19 on the economy.
• Assuming the normal monsoon season the CPI inflation
for 2022-23 is projected at 4.5 per cent with Q1:2022-23
at 4.9 per cent; Q2 at 5.0 per cent; Q3 at 4.0 per cent;
and Q4:2022-23 at 4.2 per cent, with risks broadly
balanced.

4. ASSESSMENT OF THE GLOBAL ECONOMY…..
• Purchasing manager’s index (PMI) slipped to an 18
month low of 51.4 in January 2022.
• The International Monetary Fund (IMF) revised global
output and trade growth projected a downward
movement to 4.4% and 6.0% from its earlier forecasts
of 4.9% and 6.7%.
• Sovereign bond yields firmed up across maturities and
equity markets entered correction territory

5. ASSESSMENT OF DOMESTIC ECONOMY…..
• India’s real gross domestic product (GDP) grew at 9.2
per cent for 2021-22, surpassing its pre-pandemic
(2019-20) level as per the data released by National
Statistical Office (NSO) on January 7, 2022.
• Taking into consideration the global financial, market
volatility, especially crude oil, and continuing global
supply-side disruptions pose downside risks to the
outlook the real GDP growth for 2022-23 is projected at
7.8 % with Q1:2022-23 at 17.2%; Q2 at 7.0%; Q3 at
4.3%;and Q4:2022-23 at 4.5%.

6. • Money supply (M3) and bank credit by commercial
banks rose (y-o-y) by 8.4 per cent and 8.2 per cent,
respectively, as on January 28, 2022.
• India’s foreign exchange reserves has increased by
US$ 55 billion in 2021-22 (up to February 4, 2022)
to US$ 632 billion.

7. .
MPC’S FUTURE OUTLOOK….
• The outlook for crude oil prices is rendered uncertain
by geopolitical developments even as supply
conditions are expected to turn more favourable
during 2022.
• The announcements in the Union Budget 2022-23
on boosting public infrastructure through enhanced
capital expenditure are expected to augment growth
and crowd in private investment through large
multiplier effects.

8. • On balance, the inflation estimation for 2021-22 is
retained at 5.3 per cent, with Q4 at 5.7 per cent
• Measures announced in the Union Budget 2022-23 is
expected to boost aggregate demand.
• A Continue policy support is required to boost the
domestic recovery and to ensure that inflation remains
within the target going forward

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