RBI hikes repo rate by 50 basis points, retains GDP growth forecast at 7.2pc

TBB BUREAU

MUMBAI, JUNE 8, 2022

The Monetary Policy Committee of Reserve Bank of India, which met from 6-8 June 2022, has unanimously decided to hike the Repo Rate by 50 basis points to 4.90 per cent. Consequently, Standing Deposit Facility Rate stands adjusted to 4.65 per cent and Marginal Standing Facility rate and Bank Rate to 5.15 per cent.

The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

Assuming normal monsoon in 2022 and average crude oil price of $105 per barrel in Indian basket, inflation is projected at 6.7 per cent in 2022-23.

The MPC observed that the global economy continues to grapple with multi-decadal high inflation and slowing growth, persisting geopolitical tensions and sanctions, elevated prices of crude oil and other commodities and lingering COVID-19 related supply chain bottlenecks.

RBI retained its GDP growth forecast at 7.2 for the current fiscal but cautioned against negative spillovers of geopolitical tensions and a slowdown in the global economy.

Announcing the third monetary policy of 2022-23, RBI Governor Shaktikanta Das said the available information for April and May 2022 indicates that the recovery in domestic economic activity remains firm, with growth impulses getting increasingly broad-based. Manufacturing and services purchasing managers’ indices (PMIs) for May point towards further expansion of activity.

“Looking ahead, real GDP is expected to broadly evolve on the lines of the April 2022 MPC resolution. The forecast of normal south-west monsoon should boost kharif sowing and agricultural output…This will support rural consumption. The rebound in contact-intensive services is expected to sustain urban consumption,” Das said.

“Taking all these factors into consideration, the real GDP growth for 2022-23 is retained at 7.2 per cent, with Q1 at 16.2 per cent; Q2 at 6.2 per cent; Q3 at 4.1 per cent; and Q4 at 4.0 per cent, with risks broadly balanced,” the RBI Governor said.