Home loans and other borrowings will get more expensive, with Reserve Bank of India raising its key policy rate by 25 basis points. Interest rates were increased by 250 basis points as a result of the sixth consecutive increase since the RBI began raising rates in May 2022.
The monetary policy committee voted 4-2 in favour of increasing the repo rate - the rate at which RBI lends to banks - to 6. 5% from 6. 25% earlier. The rate hike will immediately impact individual borrowers and small businesses as most retail loans are linked to the repo and get re-priced immediately.
RBI governor, Shaktikanta Das, said that the worst of the inflation was behind us when announcing the MPC decision. "Core inflation's stickiness is a cause for concern. We require a significant slowing of inflation. We must continue to be steadfast in our resolve to lower inflation, he stressed.
RBI projects growth at 6.4%, inflation at 5.3%
The central bank's growth prognosis for 2022–2023 is almost identical to the Economic Survey's projection of 6- 6.8% growth with a base case of 6.5% growth for the next fiscal year.
“The expected higher rabi output has improved the prospects of agriculture and rural demand. The sustained rebound in contact-intensive sectors should support urban consumption. The government's emphasis on capital spending and infrastructure, improved capacity utilisation, and broad-based credit growth should support investment activity,” Das said in his monetary policy.