In his speech in the morning of 5th August 2022, RBI Governor Shaktikanta Das addressed the media on the decisions taken by the Monetary Policy Committee (MPC), including the decision to hike the repo rate to its highest since August of 2019 ie. the pre-pandemic era. His speech indicated both the acknowledgement of the global inflationary pressures and capital outflows from India due to various reasons (eg: oil crisis) as well as the confidence of the RBI in the revitalisation of the Indian economy since the COVID-induced recession. The governor also announced other policy decisions as well as statistics that projected future growth trends for India.
- Reserve Bank of India increase the repo rate by 50 bps to 5.4% which is back to pre-pandemic levels
- There are an adjustment in the Bank Rates and Marginal Standing Facility (MSF) Rates to 5.65 per cent, and 5.15 per cent, respectively
- Standing Deposit Facility (SDF) Rate has been adjusted to 5.15%
- In the current financial market, there is a current $13.3 billion outflow of cash from India so far
- For, FY23, the retained growth forecast from RBI is at 7.2 per cent
- The CPI inflation or the retail inflation forecast for FY23 has also remained unchanged at 6.27 per cent:
– Q2 at 7.1%
– Q3 at 6.4%
– Q4 at 5.8%
– Q1 FY24 at 5%
- The domestic currency rose 46 paise to 78.94 against the US dollar
- The key rate interest has been increased by RBI to 50 paisa points to control the surging inflation
- After the policy decision, the NSE Nifty 50 index rose 0.32% to 17,436.95 by 0454 GMT, and the S&P BSE Sensex advanced 0.36% to 58,509.13
The governor acknowledged the impact of global trends on India. He said, “volatility in global financial markets is impinging upon domestic financial markets leading to imported inflation”. However, through the projected statistics, he tried to present a positive policy environment and forecasted a largely robust economy that can withstand outside pressures (eg: managing an inflation rate slightly higher than the MPC’s limit of 6% but largely lower than the global rate of over 7.5%). Moreover, he projected a principle of resilience and adaptability of the RBI under changing circumstances by the suggestion of building a committee to review multiple benchmark rates as alternatives to MIBOR (Mumbai InterBank Offer Rate). Overall, his speech projected confidence in the Indian economy (which he called an “island of macroeconomic, financial stability”) and its institutions in the face of global adversity.