The Reserve Bank of India (RBI) on Wednesday retained its retail inflation (CPI) forecast for the current financial year at 6.7 per cent. TheMonetary Policy Committee (MPC), led by Governor Shaktikanta Das, on Wednesday announced that the central bank raised the benchmark lending rate by 35 basis points to 6.25 per cent in a bid to contain inflation, which has remained above its tolerance level for the past 11 months.
Das in his speech said, “The battle against inflation is not over. We will keep an Arjuna’s eye on inflation and we will be ready to act. Our actions will be nimble.”
Retail inflation has been ruling above the RBI’s comfort level of 6 per cent since January this year. The governor has retained the inflation projection at 6.7 per cent for the current fiscal year.
He said that globally inflation remains high and broad based in the aftermath of Russia-Ukraine war, while adding that Indian economy remains resilient; India is seen as a bright spot in a gloomy world. “The battle against inflation is not over yet. CPI inflation forecast for April-June 2023 retained at 5.0 per cent, while the CPI inflation seen at 5.4 per cent in July-September 2023,” Das said.
With the latest hike, the repo rate or the short-term lending rate at which banks borrow from the central bank now has crossed 6 per cent. This is the fifth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August and September. In all, the RBI has raised the benchmark rate by 2.25 per cent since May this year.
Das in his speech said that the six-member MPC decided by majority view in favour of the rate hike.
The RBI has also slashed its GDP growth forecast to 6.8 per cent from an earlier estimate of 7 per cent for the current fiscal year.
In its last bi-monthly policy review released in September, the RBI had slashed the economic growth projection for the current financial year to 7 per cent from 7.2 per cent earlier on account of extended geopolitical tensions and aggressive monetary policy tightening globally.