The Reserve Bank of India (RBI) raised its benchmark interest rate by 50 basis points to 5.40 percent on Friday to contain inflation.
Following are the highlights of the RBI’s fourth monetary policy review of fiscal year 2022-23, announced by Governor Shaktikanta Das:
- Short-term key interest rate (repo) increased by 50 basis points (bps) to 5.4 percent; third consecutive walk
- Overall 140bp increase in repo since May 2022 to control inflation
- The GDP growth projection for 2022-23 remained at 7.2 percent (pc).
- GDP growth projection: Q1 at 16.2 pc; Q2 at 6.2pc; Q3 on 4.1 PC; and Q4 at 4 pc
- Real GDP growth for Q1:2023-24 estimated at 6.7 percent
- Domestic economic activity shows signs of broadening
- The projection for retail inflation is also maintained at 6.7 pc. for 2022-23
- Inflation forecast: Q2 at 7.1 pc; Q3 on 6.4pc; and Q4 at 5.8 pc; Q1: 2023-24 at 5 pieces
- India witnessed major portfolio outflow of $13.3 billion in FY23 to Aug 3
- Financial sector well capitalized and healthy
- India’s foreign exchange reserves provide insurance against global spillovers
- Monetary Policy Committee decides to remain focused on withdrawing accommodative stance to curb inflation
- Rupee depreciates more due to US dollar appreciation rather than weakness in Indian economy macro fundamentals
- RBI to remain vigilant and focus on maintaining the stability of the rupee
- Rupee this fiscal year is up to August 4 by 4.7 pc. depreciated against the US dollar
- India’s foreign exchange reserves remain the fourth largest in the world
- Mechanism to be activated so that NRAs can use the Bharat Bill Payment System for utility payments and education on behalf of their families in India
- Next rate-setting panel meeting scheduled for September 28-30, 2022.