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Just after the Reserve Bank of India (RBI) in its monetary policy meeting decided to increase the repo rate, the India Incorporated witness hikes suppressing inflation.
According to a report published by the Economic Times, top industry executives said that the repo rate hike shall result in high inflation and support the rupee. However, this is likely to hit both consumption and growth as the demand is already under pressure.
Anish Shah, managing director of Mahindra & Mahindra said, “If you look at the Indian economy, it is better placed on inflation than some of the major economies like the United States and Europe. We have seen RBI quickly raising rates, there have been curbs on exports; action taken to reduce taxes on fuel. All these things will help rein in inflation." He further said that it is very necessary to keep an eye on inflation.
It is noteworthy that the central central bank raised the repurchase rate, the rate at which it lends to banks, to the pre-pandemic August 2019 level of 5.40 percent.
RBI governor Shaktikanta Das on August 5 said, "50 basis point (hike) has become the new normal and a large number of central banks are now hiking by 75- to 100 bps…in RBI, we take a very calibrated and measured view. We factor in the impact of the rate action on the aspect of growth and on our consumer urban and rural demand."
India’s retail inflation for June fell off from 7.04 percent to 7.01 percent in June. However, it remained above the 7% mark for the third successive month and above RBI’s 2-6 percent tolerance level for a sixth straight month.
Moreover, banking regulator kept a hold on its GDP growth projection at 7.2 percent for the ongoing fiscal year ending March 31, 2023 and maintained the inflation outlook at 6.7 percent.
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