#India #hikes #interest #rates #prepandemic #levels
India’s central bank hiked interest rates for the third time in four months on Friday as Asia’s third-biggest economy struggles with a widening trade deficit and a weaker currency.
The Reserve Bank of India (RBI) raised its policy rate by 50 basis points to 5.40 percent – a level last seen in August 2019 – three months after the start of a monetary tightening cycle in May.
“Successive shocks to the global economy are taking their toll,” RBI Governor Shakkanta Das said in a televised address, noting rising inflation and slower global growth.
“Disturbingly, the globalization of inflation coincides with the deglobalization of trade. The pandemic and war have ignited tendencies toward greater fragmentation.”
India has bounced back strongly from the coronavirus pandemic, with one of the world’s fastest growth rates, but is now grappling with rising costs as commodity prices remain high.
The International Monetary Fund last week lowered India’s growth prospects for the current fiscal year, which ends in March 2023, to 7.4 percent from 8.2 percent in April.
A broad dollar rally in recent months has helped the Indian rupee depreciate sharply to below 80, its lowest against the greenback on record.
That said the rupee had appreciated since Jan.
He added that the Indian economy “remains stable and is making progress in an ocean of turmoil and uncertainty”.
India’s goods trade deficit widened to a record $31 billion in July, compared with $10.6 billion a year earlier, preliminary data released on Tuesday showed.
Imports more than doubled exports, led by petroleum products and coal.
India imports more than 80 percent of its crude oil needs, and the country’s 1.4 billion people are hit by rising fuel costs.
Consumer inflation has consistently exceeded the central bank’s target range of two to six percent for the first six months of the year, hitting an eight-year high of 7.79 percent in April before cooling to 7.01 percent in June.
The RBI kept its growth forecast at 7.2 percent for fiscal year 2022-23 and its inflation forecast at 6.7 percent.
Aggressive Federal Reserve rate hikes have further exacerbated outflows, with foreign investors pulling a net $30 billion off debt and equity in the first half of 2022.
India’s benchmark Sensex index erased early losses to trade 0.56 percent higher on Friday following the interest rate decision.
Social Tags:
#India #hikes #interest #rates #prepandemic #levels
