RBI governor Shaktikanta Das announced hike in repo rates for third time in a row.
India’s forex reserves are the fourth largest globally, RBI governor Shaktikanta Das said on Friday as he announced a third consecutive hike in policy rates. The central bank has raised key interest rates to pre-pandemic levels. The third straight increase is yet another step forward to cool down inflation.
The key lending rate has been hiked by 50 basis points to 5.40 percent — a level last seen in August 2019. “Successive shocks to the global economy are taking their toll,” the RBI governor said in a televised address. “Disquietingly, globalisation of inflation is coinciding with de-globalisation of trade. The pandemic and the (Ukraine) war have ignited tendencies towards greater fragmentation,” he further added.
However, he also added, “Financial sector remains well capitalised, and India’s forex reserves provide insurance against global spillovers.”
His statement comes days after top economist Raghuram Rajan praised the central bank’s efforts in increasing foreign reserves. “We have sufficient foreign exchange reserves. The RBI has done a good job in increasing the reserves. We are not having problems like Sri Lanka and Pakistan. Our foreign debts are also less,” the former RBI governor had said last week.
On Friday, Shaktikanta Das further stressed that the Indian economy was “holding steady and progressing in an ocean of turbulence and uncertainty”. The rupee has depreciated 4.7 percent against the US dollar since April 1, he shared, while adding in the same breath that it has fared better than currencies of many emerging economies.
The International Monetary Fund last week slashed India’s growth outlook for the ongoing financial year ending March 2023 to 7.4 percent from the 8.2 percent forecast in April.
(With inputs from Reuters, AFP)
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