Finance
The Reserve Bank of India raised the repo rate by 50 basis points to 4.9 percent on Wednesday, according to Governor Shaktikanta Das, who added that inflation was likely to remain above the upper tolerance level for three quarters of this fiscal year.
He was speaking at a press conference following the conclusion of the three-day monetary policy review meeting, which began on Monday.
Though raising policy rates in the ongoing monetary policy committee meeting was a “no-brainer,” as stated by RBI Governor Shaktikanta Das in a recent interview, investors awaited the actual percentage hike before taking new positions and determining future course of action in the financial markets.
In early May, the RBI raised the repo rate by 40 basis points (bps) to 4.40 percent in an unexpected off-cycle meeting, citing rising inflationary concerns in the economy. The repo rate is the rate at which the central bank lends banks short-term funds.
During the same off-cycle meeting, the case reserve ratio was increased by 50 basis points to 4.5%, essentially to extract some liquidity from the system.
Retail inflation in India increased to 7.79% in April, remaining above the RBI’s tolerance limit for the fourth month in a row. Retail inflation will almost certainly remain above 6% for the foreseeable future.
Das stated unequivocally on Wednesday that India’s retail inflation is likely to remain above the tolerance level until the third quarter of FY23 before falling below 6%.
The RBI forecasts overall inflation of 6.7% in FY23, with 7.5% in Q1, 7.4% in Q2, 6.2% in Q3, and 5.8% in Q4, taking into account the normal monsoon and an average crude oil basket price of $105 per barrel.
Notably, the country’s wholesale inflation rate has been in the double digits for over a year.
In terms of growth, India’s real GDP growth in FY23 is expected to be 7.2%, with 16.2% in Q1, 6.2% in Q2, 4.1 in Q3, and 4.0 in Q4 with risks broadly balanced, Das said.
Source:OCN
