The RBI Governor Shaktikanta Das announced on Friday that the Monetary Policy Committee (MPC) of the central bank increased the repo rate, often known as the key lending rate, by 50 basis points (bps), bringing it to a three-year high of 5.9 percent, RBI Governor Shaktikanta Das announced on Friday.
The country’s real GDP is projected to be 7%, which is lower than the earlier prediction of 7.2%. In his speech, the RBI Governor cited Mahatma Gandhi and said, “We are wakeful, ever vigilant, ever-striving,” noting the steps taken to address the issues facing the world and the resilience of the US economy.
The governor of the RBI stated, “The global economy is in the eye of the storm, but India has survived shocks over the last two years,” and that inflation is now hovering at around 7% and is predicted to stay at around 6% in the second half of the year.
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“We face intimidating obstacles. Since April 2022, a number of actions have been done against the backdrop of geopolitical tensions, which also limited the global supply”, he made this statement in reference to the February-starting war in Ukraine. He further stated, “The predicted inflation rate is 6.7%. In light of the circumstances at hand, the MPC must be vigilant and quick.”
He emphasized that the GDP increased 13.5% year over year in the first quarter. Although it was less than anticipated, the real GDP growth in the first quarter of this year was still 13.5 percent, maybe the greatest among the major world countries, he emphasized.
Prior to the important announcement, markets opened down, with the Sensex at 56,254. The Nifty 50 index of the National Stock Exchange (NSE) was down 0.3% at 16,776. Prior to the statement, a slender majority of economists, according to a Reuters survey, predicted a 50 basis point increase, while some others predicted a marginally smaller 35 basis point increase.
The repo rate was raised by another 50 basis points, or one hundredth of one percentage point, last month by the MPC, bringing it to 5.4%, a level last seen in September 2019. According to HT, it was the MPC’s third consecutive rate increase since its first meeting in May 2022. The main committee also kept its forecast for GDP growth and inflation for the fiscal year 2022–2023 at 6.7% and 7.2%, respectively.
In order to reduce domestic retail inflation, which has been above the RBI’s upper tolerance range of 6% since January, the MPC has boosted the key policy rate by 190 basis points since May, the news agency Reuters had emphasized in its report.
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Shaltikanta further remarked, “Uncertainties resulting from ongoing geopolitical tensions and uneasy attitudes in the global financial markets continue to cast a shadow over the inflation trend. In light of this, the MPC believed that continued high inflation required a further, carefully calibrated removal of monetary accommodation in order to curb the expansion of price pressures, stabilize inflation expectations, and limit the second-round consequences. This would help our economy’s prospects for medium-term growth.”
