The Reserve Bank of India announced on Friday that it will be raising its benchmark repo rate by 50 basis points to 5.90 per cent in order to combat the growing inflation. This was the fourth time that the rates were increased since May mirroring the steps taken by major banks all around the world.
In August, the retail inflation rate of India jumped to 7 per cent from 6.7 per cent in July. The Indian Rupee has also taken quite a hit as it breached the 81-mark against the United States dollar.
“The global economy is in the eye of the storm, but India has withstood shocks over the last two years,” the RBI governor said. Inflation is hovering around 7 percent and is expected to remain around 6 per cent in the second half of the year. “Inflation rates remain elevated food items,” RBI Governor Shaktikanta Das said.
“The GDP grew by 13.5 per cent year-on-year in the first quarter,” he added according to Reuters.
In the past week, several international banks have also increased their rates in order to stabilise the situation caused by the Ukraine-Russia conflict. The US Federal Reserve hiked its rates to a 14-year high while the Bank of England also increased its rates amid massive economic distress in the United Kingdom.
The Gross Domestic Product (GDP) went up by 13.5 per cent in the second quarter of 2022 for India but it was still under the RBI projection of 16.2 per cent.
With the supply chain getting severely affected by the ongoing crisis, it remains doubtful if the GDP will be able to grow according to the RBI projection of 7.2 per cent for the entire year.(WION)