RBI Governor Shaktikanta Das said the impact of inflation globally is weighing heavily on the domestic market. For the September quarter of 2022-23, RBI projected retail inflation at 7.1 per cent.
The central bank also cut the economic growth projection for the current fiscal to 7 per cent from 7.2 per cent estimated earlier on account of extended geopolitical tensions and aggressive monetary policy tightening globally.
Industry bodies opined that the country is still much better poised than its peers amongst the emerging market pack, both in terms of demand pick-up as also supply augmentation owing to factors like the upcoming festive season and a comfortable position on forex and debt levels.
Assocham Secretary General Deepak Sood said demand improvement and supply augmentation are the twin positives that would ensure a sustainable growth of 7 per cent, as spelt out by the RBI Governor.
Ficci President Sanjiv Mehta said while the beginning of the festive season in India will lend some impetus to demand, maintaining the momentum as we enter the next year could be a challenge and this factor will have to be built into the Budget preparation exercise.
“Businesses will have to be prepared to tackle a continued stress in the commodity prices over the near to medium term,” he added.
The Reserve Bank of India (RBI) on Friday raised benchmark lending rate by 50 basis points, the fourth straight increase since May, as it extended its battle to tame stubbornly high inflation.
The Monetary Policy Committee (MPC), comprising three members from the RBI and three external experts, raised the key lending rate or the repo rate to 5.90 per cent – the highest since April 2019 – with five out of the six members voting in favour of the hike.
Since the first unscheduled mid-meeting hike in May, the cumulative increase in interest rate now stands at 190 basis points and mirrors similar aggressive monetary tightening in major economies around the globe to contain runaway inflation by dampening demand.