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Business News/ Economy / RBI hikes retail inflation forecast to 6.7% for FY23
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RBI hikes retail inflation forecast to 6.7% for FY23

The monetary policy committee has raised repo rate by 50 basis points to 4.90%

File Photo of Shaktikanta Das (ANI/RBI)Premium
File Photo of Shaktikanta Das (ANI/RBI)

India's inflation is likely to hover around 6.7% for the current financial year, governor Shaktikanta Das said Wednesday, raising the price rise forecast from 5.7% seen earlier.

The surge in headline inflation was seen across all major categories, Shaktikanta Das said.

The monetary policy committee has raised repo rate by 50 basis points to 4.90%, Das announced, adding that the MPC is focused on withdrawal of accommodation.

All the six members of the MPC, headed by RBI Governor Shaktikanta Das, unanimously voted for the latest rate hike.

The global geopolitical situation remains fluid and commodity markets remain on the edge, rendering heightened uncertainty to the domestic inflation outlook, he said.

The war in Ukraine is lingering and India is facing new challenges with each passing day, accentuating supply chain problems, Das said. 

"The war has led to globalisation of inflation."

He added that inflation was a global problem but emerging economies were facing "bigger challenges", with market turbulence following monetary policy shifts in advanced economies.

Consumer prices continued to rise in April as inflation galloped to eight-year high of 7.8%. Wholesale prices have gained too at the fastest pace in over three decades, adding pressure on businesses to pass on high costs to consumers.

The RBI targets inflation between 2%-6%. With inflation set to hover above the tolerance level for three quarters, the central bank withdrew its intention of “staying accommodative."

Under Indian laws, if inflation stays above 6% for three straight quarters, the central bank will have to write a letter to the government laying out the reasons for failing to meet its mandate as well as suggest remedial measures to bring prices under control.

Indian bonds gained, with the yield on benchmark 10-year bond falling by two basis points to 7.49%, while the rupee was little changed. Stocks edged lower.

Last month, RBI raised the key lending rate by 40 basis points in an off-cycle monetary policy review to check spiraling inflation.

Further, the RBI has retained India's growth rate at 7.2% for FY23. India's economic growth further slowed last quarter, hit by global supply shortages and higher input costs.

India bounced back strongly from the coronavirus pandemic with one of the world's fastest growth rates, but is now grappling with rising costs as commodity prices skyrocket worldwide.

"From the policy withdrawal perspective, the RBI in the last two months has moved quite aggressively and swiftly," Upasna Bhardwaj, senior economist at Kotak Mahindra Bank, said in a note.

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Published: 08 Jun 2022, 10:16 AM IST
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