The Reserve Bank of India-led Monetary Policy Committee on Friday increased the repo rate by 50 basis points to take it to pre-pandemic levels, as the monetary authority seeks to bring down inflation to its comfort band and in line with policy tightening by key central banks. Now, the Standing Deposit Facility (SDF) stands adjusted to 5.15 percent. Bank rates and Marginal Standing Facility (MSF) rates were adjusted to 5.65 percent, and 5.15 per cent, respectively. RBI left the CRR untouched. Cash Reserve Ratio (CRR) is the deposit that banks are mandated to maintain by the RBI as reserves in the form of liquid cash.
The RBI retained the FY23 GDP growth forecast at 7.2 per cent with Q1 (April-June) GDP growth forecast at 16.2 per cent, Q2 (July-September) GDP growth forecast at 6.2 per cent, Q3 (October-December) GDP growth forecast at 4.1 per cent and Q4 (January-March ’23) GDP growth forecast at 4 per cent.
Retail inflation or the CPI inflation forecast for FY23 has also remained unchanged at 6.7 per cent, with April-June inflation forecast at 7.5 per cent, July-September forecast at 7.4 per cent, October-December at 6.2 per cent and January-March 2023 inflation forecast at 5.8 per cent.
The RBI Governor said that CPI is above comfortable levels. He added that the MPC stressed that sustained high inflation could destabilise inflation expectations. Further, he said that volatility in global markets is leading to imported inflation.
The next meeting of the MPC is scheduled for October 2022.
- Large portfolio outflow of $13.3 Billion during CY till date
- External debt to GDP ratio fell (21.2% in march 2021/19.9% in march 2022)
- Export – remittances expected to keep the deficit at comfort levels
- Monsoon & Reservoir levels above normal
- Urban demand improving, but rural demand is mixed
- Import of capital goods also showed robust growth
- Capacity utilization above the long-run average
- Bank Credit growth accelerated to 14% (YoY)
- Good progress of the monsoon will support rural consumption
- Inflation trajectory continues to be heavily contingent on geopolitical developments
- Domestic edible oil prices seen softening further
- Resumption of wheat supply is sustained could help temper international prices
- Persistently elevated cost of living conditions could translate into higher wages
- FY23 Q1 net FDI $1360cr