As part of the RBI’s continuing efforts to tackle rising inflation in the Indian economy, all members of the RBI’s Monetary Policy Committee (MPC) unanimously voted to increase the repo rate by 50 bps to 5.40%.
Jayanth Varma, one of the six members of the MPC, expressed reservations on the continuation of withdrawal of accommodative stance, though.
The committee had first raised rates by 40 basis points in May, followed by 50 basis points in June.
Inflation is projected at 6.7% in 2022-23, it has remained higher than the 4% target of the RBI for 33 consecutive months now.
Consumer price index (CPI) inflation also remains uncomfortably high. CPI inflation for Q1- 2023-24 is projected at 5%, and is expected to remain above 6%, the RBI Governor Shaktikanta Das said in a statement.
This means loan EMIs will go up for consumers.
Governor Das said that the domestic economic activity is exhibiting signs of broadening, as south-west monsoon rainfall and reservoir levels are above normal, kharif crop sowing is progressing well, marginally below last year’s level due to uneven rainfall distribution.
A ‘resilient economy’ is giving us space to act on inflation with an eye on growth, he added.
India’s foreign exchange reserves remain the fourth largest globally, despite the drawdown to limit rupee volatility.
FDI stands at 13.6 billion dollars in the first quarter of the current financial year, as compared to 11.6 billion dollars in the first quarter of last year.
The ‘Bharat Bill Payment System’ will facilitate inward gross payments for non-resident Indian (NRIs) to pay bills in India and also help senior citizens, according to the RBI Governor.
Governor Das also said that the volatility in global financial markets is impinging upon domestic financial markets, causing imported inflationary reactions.
The Indian rupee fared much better than many other currencies, he added, saying that the depreciation to record lows was more due to a strengthening dollar than weakening domestic conditions.
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