short-term funds to banks, to 5.90 per cent – the highest level since April 2019 – from 5.40 per cent currently.
Announcing the policy decision, RBI Governor Shaktikanta Das highlighted the worry of the rate-setting panel on inflation and said the central bank is watching the price situation closely.
In August, the RBI MPC increased the repo rate by 50 bps to 5.4 per cent from 4.9 per cent in June. RBI Governor Shaktikanta Das said in his post policy meet address that the standing deposit facility (SDF) rate and the marginal standing facility (MSF) rate were also increased by the same quantum to 5.65 per cent and 6.15 per cent, respectively.
The RBI guv added that inflation continues to be high. “After two shocks of coronavirus pandemic and the conflict in Ukraine, now we are in the midst of another shock, a storm, arising from aggressive monetary policies by the global central banks,” he said. Das further emphasised that the US dollar has reached a new high. “Emerging market economies are confronted with challenges of slowing global growth, elevated food and energy prices, spillovers from advanced economy policies, debt distress and sharp currency depreciation,” he said.
However, he maintained that the Indian economy remains resilient despite global headwinds wherein global recession fears are mounting, and inflation is high. The MPC cut the FY23 GDP growth forecast to 7 per cent from 7.2 per cent projected earlier. GDP growth for the first quarter of the next financial year is seen at 6.7 per cent. India’s economy grew by 13.5 per cent in the April-June period this fiscal, the fastest in the last four quarters, on account of better performance by the agriculture and services sectors. Meanwhile, the inflation projection for FY23 has been kept unchanged at 6.7 per cent on upside risks to food prices. “Today inflation is hovering around 7 per cent and we expect it to remain elevated at 6 per cent in the second half of the year,” RBI guv said. For the first quarter of the next financial year, the CPI infation is pegged at 5 per cent.
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