G-SAP 1.0

RBI in its April 2021 monetary policy continues with the accommodative stance as long as necessary to sustain growth on a durable basis and continue to mitigate the impact of COVID-19.

The marginal standing facility (MSF) rate and the bank rate remain unchanged at 4.25% and the reverse repo rate stands unchanged at 3.35%.

The rates were left unchanged to boost Public investment in key infrastructure sectors, which is a force multiplier with a historically proven ability to revive the broader economy by directly enhancing capital stock and productivity, and by attracting private investment

Reserve Bank is optimistic about a pick-up in demand and expansion of business activity into the financial year 2021-22.

Economic activity is normalising in spite of the surge in infections. It can be seen in:

Rural demand remains buoyant and record agriculture production in 2020-21 bodes well for its resilience.
Urban demand has gained traction and should get a fillip with the ongoing vaccination drive.

New issue: A surge in New cases raises uncertainty to the domestic growth outlook amidst tightening of restrictions by some state governments.

India is prepared to meet the challenges posed by this resurgence in infections through its

Fiscal and monetary authorities stand ready to act in a coordinated manner to limit its to the economy at large and contain its fallout on the ongoing recovery
The projection of real GDP growth for 2021-22 has been retained at 10.5% consisting of 26.2% in Q1; 8.3% in Q2; 5.4% in Q3; and 6.2% in Q4.
Headline inflation at 5.0% in February 2021 remained within the tolerance band, some underlying constituents were testing the upper tolerance level.

G-SAP 1.0

RBI, for the year 2021-22, has decided to put in place a Secondary market G-sec Acquisition Programme or G-SAP 1.0, to give it a distinct character.
The central bank Accordingly, the Reserve Bank will purchase five types of government securities via a multi-security auction using multiple price methods. The dates of maturity vary from November 2, 2023, to March 16, 2035. The RBI has reserved the right to decide on the quantum of purchase of individual securities and accept bids for less than the aggregate amount.
Under the programme, the RBI will commit upfront to a specific amount of open market purchases of government securities with a view to enabling a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions.
For Q1 of 2021-22, therefore, it has been decided to announce a G-SAP of? 1 lakh crore.
The first purchase of government securities will be conducted for an aggregate amount of? 25,000 crore under G-SAP 1.0.

Source: TH

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