
Shaktikanta Das, RBI Governor
New Delhi, February 8
The Reserve Bank of India (RBI) has increased the repo rate by 25 basis points to 6.5 per cent and forecast slower economic growth of 6.4 per cent during the next fiscal as compared to the estimation of 7 per cent during the current financial year.
- Editorial: Repo rate hike
Repo rate is the interest rate at which the central bank lends to banks. The move to raise the rate will make loans, including housing and auto, and corporate credit expensive.
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Growth forecast
6.4% RBI’s growth forecast next fiscal
The Union Budget pegs the actual growth rate for 2023-24 at a marginally higher 6.5 per cent, while the Economic Survey estimates the real growth rate to be between 6 and 6.8 per cent.
Announcing the bimonthly monetary policy in Mumbai on Wednesday, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) decided on a sixth successive increase in the repo rate by a split decision of four to two. Faced with finding a balance between raising interest rates to check inflation and not affecting industry’s growth, Das justified the hike on the basis of RBI’s internal surveys which said manufacturing, services and infrastructure sector firms were 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% 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 would remain above the comfort band of 6% during the current fiscal, but moderate to 5.3% during the next fiscal.
Quarterly inflation rates will decline to 5.7% during the ongoing fourth quarter of 2022-23 and further reduce to 5%, 5.4%, 5.4% and 5.6% during the four quarters of 2023-24. Quarterly GDP growth rates are projected at 7.8%, 6.2%, 6% and 5.8% during the four quarters of 2023-24.
After the repo rate hike, the standing deposit facility (SDF) rate has been adjusted to 6.25%, and the marginal standing facility (MSF) rate and the bank rate to 6.75 per cent. Das said it was now proposed to permit all inbound travellers to use UPI payments for their merchant payments while they are in India. To begin with, this facility will be extended to travellers from G20 countries arriving at select international airports.
Projections for next fiscal
Quarterly inflation rates estimated at 5%, 5.4%, 5.4% and 5.6% during the four quarters of the 2023-24 fiscal
Quarterly GDP growth rates are projected at 7.8%, 6.2%, 6% and 5.8% during the four quarters of 2023-24