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NEW DELHI: The Reserve Bank of India (RBI) expects the Indian economy to contract at a slower pace of 7.5% than what has been estimated by other agencies even as it sees inflation continuing to pose challenges, according to RBI Governor Shaktikanta Das.

Goldman Sachs expects the Indian economy to contract by 10.3% in 2020-21. Moody’s expects the same to be of the magnitude of (-)8.9%.

“The outlook for inflation has turned adverse relative to indications last two months. The MPC sees the inflation at 6.8% for Q3 (September-December) and 5.8% for Q4," Das said in a televised address.

India's retail inflation rose to the highest level in October in more than six years on account of elevated food prices. According to Consumer Price Index (CPI) data released by the Ministry of Statistics and Programme Implementation, inflation stood at 7.61% in October — the highest since May 2014. Retail inflation recorded at 7.27% in September, according to data. The Consumer Food Price Index jumped to 11.07% in October, up from 10.68% in September.

Das’s comment on economic growth and inflation came after the central bank’s Monetary Policy Committee (MPC) today decided to keep key policy rates unchanged while continuing to maintain an accommodative stance through March as well as into the next financial year.

The policy repo rate, the benchmark at which RBI lends to the banks, will stay at 4%, RBI Governor Shaktikanta Das said in a televised address. The reverse repo rate will continue to be 3.35%.

“The economy is recuperating faster than anticipated. Rural economy demand is expected to strengthen further while urban demand is also gaining momentum," Das said.

Das said corporate earnings so far indicated that demand recovery is happening while profit margins are rising on the back of cost savings.

Private investment is still slack and capacity utilization hasn’t fully recovered, Das said.

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