Bank of India to raise rate on Feb 1-Survey
2023.01.30 01:34
Bank of India to raise rate on Feb 1-Survey
By Tiffany Smith
Budrigannews.com – At its meeting one week after New Delhi’s February 1 budget, the Reserve Bank of India is expected to raise its main interest rate by 25 basis points to 6.50 percent before maintaining that level for the remainder of the year.
According to a poll conducted last month, these projections remained unchanged, and they also barely changed when it came to predictions that GDP growth would slow to 6.0 percent in the fiscal year 2023/24, down from the anticipated 6.7 percent in the current one.
As Asia’s third-largest economy slows, the RBI is likely to pause, like many other major central banks, and wait for inflation to fall before considering a shift toward a stimulative stance.
In a Reuters poll conducted between January 13 and 27, more than three-quarters of economists, 40 out of 52, anticipated that the RBI would raise its key repo rate by 25 basis points to 6.50 percent. The remaining twelve anticipate no changes at the meeting on February 8.
Rates were predicted to stay at 6.50 percent until the end of 2023, according to the median forecast.
“They (the RBI) need to take a break at some point to see how the previous monetary tightening affected growth and inflation as a whole.” Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, stated, “I believe it is not premature for them to pause after 6.50%.”
“That doesn’t mean they won’t focus on inflation on the guards.”
According to the poll, inflation, which was last reported at 5.72 percent in December, was anticipated to average 5.0% in the fiscal year 2023/24 and 4.9% in the fiscal year 2024/25. This is well within the RBI’s target range of 2%-6%, having been above it for most of 2022.
It is anticipated that Prime Minister Narendra Modi’s administration will prioritize reducing the fiscal deficit rather than increasing spending in the final full budget before a general election in 2024.
Even though the anticipated growth rate of 6.0 percent is likely to be faster than that of many other economies worldwide, it would still not be sufficient to generate the number of jobs required to lift hundreds of millions of Indians out of poverty.
India’s economic outlook is likely to be downgraded in the coming months as well, given the deteriorating global economic outlook.
