Reserve Bank of India governor Shaktikanta Das. Photo: AFP

With India facing an Omicron threat, the central bank has opted for the status quo on key interest rates for the ninth time in a row and continues with an accommodative stance.

This is in line with the projections made by analysts.

The Reserve Bank of India’s monetary policy committee on Wednesday decided to keep repo rates unchanged at 4% and reverse repo at 3.35%. The decision was taken unanimously by the six-member committee, headed by Governor Shaktikanta Das.

The repo rate is the rate at which the central bank lends to other banks, while the reverse repo is the rate at which it borrows from banks. The central bank holds a monetary policy committee meeting every two months.

While announcing the outcome of the three-day meeting, Das said the committee sees headwinds from global developments as a major concern. He said though the Indian economy was relatively well-positioned on the path to recovery, it cannot be immune to global spillovers or to possible surges of infections from new mutations of the coronavirus.

The central bank retained its growth projection at 9.5% for the current fiscal year, despite the possible threats posed by Omicron. Gross domestic product growth for the third quarter has been projected at 6.6% and 6% for the fourth quarter.

As for inflation, the Reserve Bank of India has retained the consumer price index inflation forecast for FY22 at 5.3%, but revised the projection for the current quarter upward to 5.1%, from 4.5%.

For the fourth quarter, CPI inflation is seen at 5.7%, compared to 5.8% projected earlier. The governor hoped that recent cuts in the excise duty on gasoline and diesel would bring down the inflation rate.

The central bank has slashed the repo rate by a total of 115 basis points since March 2020, to soften the blow from the Covid-19 pandemic.

Omicron cases are being detected in some parts of India and the government has tightened Covid testing protocols at all airports. The federal government has told states to quickly track primary and secondary contacts of positive cases and test them.

It also wants those with the new variant to be treated in designated Covid facilities with separate isolation areas.