Shaktikanta Das says current account deficit will be under control

RBI MPC Monetary Policy Review Announcement Live Updates: Reserve Bank of India (RBI) Monetary Policy Committee (MPC) rose on Friday repo rate by 50 basis points to me 5.40 percent With immediate effect, Governor of the Reserve Bank of India Shaktikanta Das announced.

This is the third rate increase by the central bank in this fiscal year. Prior to this, the Reserve Bank of India (RBI) raised the repo rate by 40 basis points in an off-session meeting May and 50 basis points in June. Market experts expected the MPC to raise the repo rate by At least 35 basis points (bps) at this meeting.

Retail inflation or the Consumer Price Index (CPI), which the Reserve Bank of India (RBI) considered when considering the benchmark lending rate, has settled at 7.01 percent in June. Retail inflation has continued to remain above the central bank’s comfortable 6 per cent level since January of this year.

In his speech, Das said the MPC vote was unanimous and said the MPC decided to remain focused on withdrawing the consensual stance of inflation control. In addition, it was announced that Permanent Deposit Facility (SDF) Stand rate adjustable for 5.15 percent and the marginal permanent establishment (MSF) rate and bank rate for 5.65 percent.

In his speech today, Das said the Indian economy is grappling with rising inflation and added that India is facing $13.3 billion in capital outflows in the past few months.

He noted that the financial sector remains well capitalized and India’s foreign exchange reserves provide insurance against global repercussions.

Speaking of growth, Das said that the real increase in GDP 2022-23 forecast is retained 7.2 percent Whereas Q1 was 16.2%, Q2 was 6.2%, Q3 was 4.1%, and Q4 was 4.0% with the risks broadly balanced. But he warned of the dangers of continuing Russia-Ukraine war.

Designed by Shamin Aladdin/Indian Express

Speaking of inflation, the Governor of the Reserve Bank of India said retail inflation It remains uncomfortably high and note that inflation is expected to remain above 6 per cent. He said that inflation expectations 6.7 percent retention in 2022-23, with Q2 at 7.1 percent; Q3 at 6.4 percent; and Q4 at 5.8 percent, and risks are evenly balanced, assuming a normal monsoon in 2022 and an average price of crude oil (Indian basket) of US$105 per barrel. The CPI inflation rate for the first quarter of 2023-24 is expected to be 5.0%.

In the post-policy press conference, Das said the Indian economy is an island of stability despite the black swan events and multiple shocks.

Speaking to reporters, the central bank chief said that inflation has peaked and will decline, but is at unacceptably high levels. talking on current account deficit (CAD), Das said CAD will be easy to manage and the Reserve Bank of India has the ability to manage the gap. Das said the Reserve Bank of India has the capacity to fund the Canadian dollar and added that foreign exchange reserves remain strong and we will be dealing with excessive volatility in the exchange rate.

When asked about sharp increases in interest rates, he said that a 50 basis point hike is the new normal and that global central banks recently raised rates by 75-100 basis points. He indicated that monetary policy will be calibrated, measured and smart from now on.

How did economists and market experts react:

  • Adil Shetty, CEO, He said: “The rise in the repo rate coupled with inflation will hit new and existing borrowers hard. A 140 basis point increase in the past few months means that borrowers who used to pay interest at 6.8-7 per cent will now pay 8.2-8.4 per cent. This means that even For a 20-year loan, the amount of interest to be paid is higher than the principal.If the EMI remains constant, the 20-year loan term can go up by up to 8 years.Since most lenders will not be penalized for this increase in term, It is recognized that EMI loans will increase. It is now necessary to have a repayment plan because using EMIs alone means a very high interest flow.”
  • DRE Reddy, CEO and Managing Partner at CRCL LLP He said, “The Reserve Bank of India (RBI) today increased its repo rate by another 50 basis points to 5.40 per cent with immediate effect. With this move, the stage is set for a return to pre-COVID levels with the end of the easy money era. There is no prospect on Launching to slip India Recession. That final rate will rise to 5.90 percent by the end of fiscal year 23. A normal monsoon, a good crop year, easing household inflation and easing tension between Russia and Ukraine will help keep crude oil prices in check.”
  • Ravi Modani, Founder and CEO at 121 Finance He said, “The policy announcement is on the higher end of the expected lines, reflecting RBI’s continued focus on maintaining a balance between growth and stability. We are now in a situation where there is a significant amount of challenges for the Indian economy, especially from global monetary policy and political developments. Any decline in Demand due to high cost of borrowing, should be matched by rural demand coming from very good monsoon.At the same time, this may affect the second quarter earnings of most companies.However, this is a very wise decision to proceed with this stage of global uncertainty with caution. Strong and optimistic resulting from easing inflation and keeping the rupee strong.”
  • Motilal Oswal, Managing Director and CEO of Motilal Oswal Financial Services He said, “The Reserve Bank of India at its last Monetary Policy Committee meeting raised the repo rate by 50 basis points to 5.4 per cent – levels seen before COVID-19 pandemic. The central bank raised the interest rate for the third consecutive month since May 22 by 140 basis points in its efforts to contain inflation. Despite this sharp rise, the Reserve Bank of India expects inflation to remain above its comfort zone and has kept its CPI inflation forecast at 6.7 per cent for fiscal year 23. The Reserve Bank of India expects India’s GDP growth to remain solid at 7.2 per cent cent in FY23. We believe commodity prices have calmed down including crude oil, and inflation may be at its peak. We expect the RBI not to be too aggressive in subsequent policy meetings and to be data driven based on inflation numbers.”