Amid soaring inflation and fuel prices skyrocketing to over Rs 100 for more than a year, Reserve Bank of India Governor Shaktikanta Das, on Wednesday, has projected inflation at 6.7% in 2022-23. While unveiling the third monetary policy for the current fiscal, he said on the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC), has decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 4.90% with immediate effect.
WATCH: RBI Gov Shaktikanta Das full statement here:
“Since the MPC’s meeting in May 2022, 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,” said the RBI Governor. According to Das, global financial markets have been roiled by turbulence amidst growing stagflation concerns, leading to a tightening of global financial conditions and risks to the growth outlook and financial stability.
Check the factors that lead to the rise in inflation
The RBI Governor further noted that restrictions on wheat exports would improve the domestic supplies but the shortfall in the rabi production due to the heat wave could be an offsetting risk. The forecast of a normal southwest monsoon predicts well for the Kharif agricultural production and the food price outlook. He maintained that the edible oil prices remain under pressure on adverse global supply conditions, notwithstanding some recent corrections due to the lifting of the export ban by a major supplier. “Consequent to the recent reduction in excise duties, domestic retail prices of petroleum products have moderated. International crude oil prices, however, remain elevated, with risks of further pass-through to domestic pump prices. There are also upside risks from revisions in the prices of electricity,” he said. “Taking into account these factors, and on the assumption of a normal monsoon in 2022 and average crude oil price (Indian basket) of US$ 105 per barrel, inflation is now projected at 6.7% in 2022-23, with Q1 at 7.5 per cent; Q2 at 7.4 per cent; Q3 at 6.2 per cent; and Q4 at 5.8 per cent, with risks evenly balanced,” noted Shaktikanta Das.