25 Basis Points Hike In The Next Monetary Policy, RBI

March 28, 2023

What’s the news?

The RBI is going for a meeting for 3days in April’s first week, and in the discussion, it is like to be said that there may be a hike in the retail inflation rate by 25 basis points. Retail inflation is already above the normal of 6, and if this hike takes place, it will strike strong in the backbone of every family class.

Credit: Google

The Retail Inflation Rate In India

Despite retail inflation exceeding the desired threshold of 6 percent and several global peers, such as the US Fed, continuing to adopt a hawkish stance, the Reserve Bank of India may implement a 25 basis point hike during the upcoming bi-monthly monetary policy announcement on April 6.
The Reserve Bank’s Monetary Policy Committee (MPC) is scheduled to convene for three days from April 3 to April 6. During this time, the committee will evaluate domestic and global factors before announcing their first bi-monthly monetary policy for the 2023-24 fiscal year.
During its upcoming monetary policy decision, the committee will thoroughly deliberate on two pivotal factors: the heightened retail inflation and recent actions taken by central banks of developed nations, including the US Federal Reserve, European Central Bank, and Bank of England.
To curb inflation, the Reserve Bank of India (RBI) has persistently raised benchmark rates since May 2022. External factors such as the global supply chain disruption due to the Russia-Ukraine war have been the critical drivers of inflation.
In its previous policy meeting in February, the RBI increased the policy rate or repo by 25 basis points to reach 6.50 percent.
After staying below six percent for a consecutive two months in November and December of 2022, the retail inflation rose and surpassed the comfort level, necessitating the intervention of the Reserve Bank. This escalation is indicated by the Consumer Price Index (CPI) -based inflation, which reached 6.52 percent in January and 6.44 percent in February.
In a recent statement, RBI Governor Shaktikanta Das acknowledged the various pressures that have impacted the global economy, including the COVID-19 pandemic, the Ukraine conflict, and the widespread implementation of monetary policy tightening. Nevertheless, he remarked that the domestic economy and financial sector have remained resilient, and that inflation has shown signs of improvement.

Credit: Google

Note: Inflation refers to the upward price trend within a specified timeframe. This gauge is usually comprehensive in scope and may encompass the overall price surge or the standard of living within a nation.

Also read: Tata Motors Plans To Set Up Separate EV Showrooms In India

1^st Bi-monthly Monetary Policy 2022-2023 By RBI?

RBI issued its first bi-monthly monetary policy in 2022-23 under the governor Shaktikanta Das. And it laid down some big announcements as well. Seeing the performance of the first bi-monthly monetary policy, RBI will announce its second one for the financial year 2023-2024. Let’s see the highlights of RBI’s first bi-monthly monetary policy:

The policy repo rate shall remain steady at 4%, with no adjustments anticipated for the marginal standing facility rate nor the bank rate, which shall remain at 4.25%.
The monetary policy aims to maintain a supportive stance, with a primary focus on the gradual removal of accommodation measures to effectively manage inflation and keep it within the set target range.
The growth projection of the GDP for FY’23 has decreased from 7.8 percent to 7.2 percent. This projection assumes that the Indian basket crude oil price would remain at USD 100 per barrel during the fiscal year.
The inflation projection for FY’23 has been revised upwards from 4.5 percent to 5.7 percent.
Heightened geopolitical tensions are poised to negatively impact the economic outlook.
The strong Rabi output is expected to bolster the revival of demand in rural areas and facilitate an upswing in contact-intensive services.

Credit: Google