New Delhi, February 8
The Reserve Bank of India hiked the repo rate by 25 per cent to 6.5 per cent and forecast slower economic growth of 6.4 per cent during next fiscal as compared to the estimation of 7 per cent during the current fiscal year.
The Union Budget pegs the actual growth rate for 2023-24 at a marginally higher 6.5 per cent and the Economic Survey estimates the real growth rate to be between 6 and 6.8 per cent.
Announcing the bi-monthly monetary policy in Mumbai on Wednesday, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) decided on a sixth successive hike in the repo rate, or the interest rate at which the Central Bank lends to banks, by a 4:2 split decision.
Faced with finding a balance between hiking interest rates to check inflation and not affecting industry’s growth, Das justified the hike on the basis of the RBI's internal surveys which said manufacturing, services and infrastructure sector firms are optimistic of the business outlook.
“Emerging market economies are facing sharp trade-offs between supporting economic activity and controlling inflation while preserving policy credibility,” said Das in this respect. The repo rate at 6.5 per cent still trails the pre-pandemic level and core inflation (manufacturing) remains sticky, he added.
Growth during 2023-24 would, however, be weighed down by geo-political tensions and tightening global financial condition, Das cautioned.
The MPC resolved to keep a close watch on inflation, which will remain above the comfort band of 6 per cent during the current fiscal but moderate to 5.3 per cent during the next fiscal.
Quarterly inflation rates will decline to 5.7 during the ongoing fourth quarter of 2022-23 and further to 5 per cent, 5.4 per cent, 5.4 per cent and 5.6 per cent during the four quarters of 23-24. Quarterly GDP growth rates are projected at 7.8 per cent, 6.2 per cent, 6 per cent and 5.8 per cent during the four quarters of 2023-24.
After the repo rate hike, the standing deposit facility (SDF) rate has been adjusted to 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75 per cent.
Das said it is now proposed to permit all inbound travellers to use UPI payments for their merchant payments while they are in India. To begin with, the facility will be extended to travellers from G20 countries arriving at select international airports.
The RBI Governor also announced a new facility, the ability to use UPI at coin-vending machines instead of tendering physical bank notes. “These vending machines will dispense coins against debit to the customer’s account using UPI instead of physical tendering of bank notes. This will enhance the ease of accessibility to coins,” he said.
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