New Delhi: The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC), headed by Governor Shaktikanta Das, on Friday announced a 50 basis point hike in the repo rate to 5.9 percent. The rates for the standing deposit facility (SDF) and the marginal standing facility (MSF) were also raised by 50 basis points to 5.65 percent and 6.15 per cent.
The central bank decided to withdraw accomodative stance while supporting growth. He mentioned that the real GDP growth for FY23 is projected at 7 percent.
Shaktikanta Das said, “World has been confronted with one crisis after another. It has witnessed two major shocks in last 2.5 years. Aggressive monetary policy action is the third shock in the world. India has withstood shock from coronavirus pandemic and the conflict in Ukraine.”
Das said inflation was expected to remain elevated at around 6 per cent in the second half of this fiscal year, suggesting price pressures would remain higher for a longer period than previously expected. He said that inflation expected to remain elevated at 6.7 per cent for FY23. Recent correction in global crude oil prices if sustained may provide relief to inflation, he pointed out at the MPC meet.
The bank cut its economic growth projection to 7 per cent for 2022-23 fiscal year from an earlier estimate of 7.2 per cent.
Consumer price index (CPI) remains ‘elevated’ due to large adverse supply shocks, firming up of domestic demand, said the governor, while adding that India’s economic activity remains stable.
During his speech, merchandise exports have been affected because of external factors. High frequency data for Q2 indicates economic activities remain resilient and private consumptions are also picking up, he noted.
The RBI’s MPC started its three-day deliberations on Wednesday amid expectations of yet another rate hike of 50 basis points to tame surging inflation, in line with similar actions taken by other major central banks around the globe, including the US Fed.
The MPC, headed by Governor Das, began its three-day deliberation on September 28.
The banking regulator, based on the recommendations of the MPC, had hiked 50 basis points in repo rate each in June and August after raising the short-term lending rate by 40 basis points in an off-cycle decision in May.
The bank had since May raised the repo rate by 140 basis points (bps). After the hike, the rate stands at 5.9 per cent. The consumer price index (CPI) based on retail inflation, which had started showing signs of moderation in May, has again firmed up to 7 per cent in August.
Meanwhile, according to the data released by the RBI’s Balance of Payments on Thursday, during the First Quarter (April-June) of 2022-23, the current account balance recorded a deficit of $23.9 billion (2.8 per cent of GDP) in the first quarter, up from $13.4 billion (1.5 per cent of GDP) in January-March period of the last fiscal year.
(Vinayak)