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RBI cuts growth forecast to 7.2% for FY23 amid geopolitical uncertainty MIGMG News

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Mumbai: The Reserve Bank on Friday cut its economic growth forecast to 7.2 percent for the current fiscal year from 7.8 percent estimated earlier amid volatile crude oil prices and supply chain disruptions due to the ongoing war between Russia and Ukraine.

The Reserve Bank of India Governor Shaktikanta Das unveiled the first fortnightly review of the monetary policy of the current fiscal and said that external developments over the past two months have exemplified the downside risks to domestic growth and upside risks to inflation.

“Real GDP growth for 2022-23 is now expected at 7.2 percent with Q1: 2022-23 at 16.2 percent; Q2 at 6.2 percent; Q3 at 4.1 percent; and Q4 at 4 percent, Assuming crude oil (Indian basket) hits $100 per barrel during 2022-23, adding that the Indian economy is steadily recovering from the downturn caused by the pandemic.

Earlier this year, the January economic survey projected a growth rate of between 8 and 8.5 percent for the current fiscal year. With the easing of restrictions, the governor of the Reserve Bank of India said, domestic air passenger traffic rebounded in March.

“According to our surveys, consumer confidence is improving, and household optimism in the outlook for next year is boosted by a pickup in sentiment.”

He said that business confidence in the region is optimistic and supportive of reviving economic activity. Going forward, he added, strong spring (winter crop) production should support a recovery in demand in rural areas, while a recovery in contact-intensive services should help further boost urban demand. The Reserve Bank of India on Friday kept the benchmark interest rate unchanged at 4 per cent.

RBI maintains status quo, leaves benchmark lending rate unchanged at 4%

The Reserve Bank of India (RBI) on Friday kept the benchmark interest rate unchanged at 4 per cent and decided to move forward with the withdrawal of its accommodative stance to ensure inflation remains within the target level.

Retail inflation has been hovering above the higher tolerance level of the Reserve Bank of India for the past two months. It was 6.07 percent in February and 6.01 percent in January, mainly due to higher food prices.

This is the eleventh consecutive time that the Monetary Policy Committee (MPC) chaired by Reserve Bank of India Governor Shaktikanta Das has maintained the status quo. The central bank had last adjusted the repurchase rate or short-term lending rate on May 22, 2020, in an out-of-policy cycle to increase demand by cutting the interest rate to a historical low.

Announcing the semi-monthly monetary policy review, Das said that the Monetary Policy Committee, based on its assessment of the macroeconomic situation and outlook, voted unanimously to keep the repo (repo) rate unchanged at 4 percent.

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He said that the committee decided unanimously to remain loose with focus on withdrawing its current position to ensure that inflation remains within the target range in the future. Thus, the reverse repo rate will continue to earn interest at 3.35 per cent to the banks for their deposits held with the Reserve Bank of India.

Dass further said that the fixed margin facility, the MSF interest rate and the bank rate, remained unchanged at 4.25 per cent. The Reserve Bank of India cut its current fiscal growth forecast to 7.2 percent from 7.8 percent earlier; While raising inflation expectations to 5.7 per cent from 4.5 per cent.

The MPC was given a mandate to keep the annual inflation rate at 4 percent until March 31, 2026, with a higher tolerance of 6 percent and a lower tolerance level of 2 percent. The bi-monthly policy comes on the back of the budget as nominal GDP has been estimated at 11.1 percent for 2022-23.

The government expects this growth to be fueled by a huge capital spending program identified in the budget with the aim of mobilizing private investment by stimulating economic activities and creating demand.

Finance Minister Nirmala Sitharaman raised capital expenditures (capex) by 35.4 per cent for the 2022-23 fiscal year to Rs 7.5 crore to continue the public investment-led recovery of the pandemic-hit economy.

The capital expenditures for the current financial year are fixed at Rs 5.5 crore.

Spending on construction of multimodal logistics complexes, metro systems, highways and trains is expected to increase demand for the private sector as all projects will be executed through contractors.

Also read: Bucha killings ‘extremely disturbing’: India joins call for independent UN Security Council investigation

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