RBI MPC Policy outcome: From Inflation, GDP estimates to remark on VAT- Key highlights of Governor Shaktikanta Das commentary

While announcing the monetary policy decision, the Reserve Bank of India’s Governor Shaktikanta Das sees inflation to remain above 6 per cent in the first three-quarters of the current fiscal, however, pointed out that the Indian economy remains resilient. 

The Russia-Ukraine war led to globalisation of inflation and the RBI’s steps will be calibrated as well as focused on bringing down inflation to the target level, Governor Das said in his commentary, while announcing a hike in repo rate by 50 basis points as expected. 

According to the Governor, the food, energy and commodity prices have been elevated and the process of recovery in emerging markets is getting affected, due to this, the inflation has jumped beyond the tolerance level. 

The 6-member monetary policy committee decided to remain focussed on the withdrawal of accommodation stance, Governor said, adding that the upside risk to inflation persists; a recent spike in tomato, crude prices fuelling inflation. 

For the next three quarters, Governor Das said, the April-June GDP growth seen at 16.2 per cent, followed by 6.2 per cent in July-September and eventually 4.1 per cent during the October-December quarter of this fiscal. And for FY23 it projects 7.2 per cent growth for the current fiscal. 

The governor is of the view that a further cut in VAT (Value Added Tax) by state governments on motor fuel can further soften inflation. The central bank is also focused on an orderly government borrowing programme, the governor added. 

With respect to inflation estimates, RBI sees 7.5 per cent in Q1, 7.4 per cent in Q2, 6.2 per cent in Q3 and 5.8 per cent in Q4 of the current fiscal, while in FY23 it shall be around 6.7 per cent, Das said. 

According to governor Das, the overall situation remains challenging, committed to dealing with challenges emanating from overseas and expects a normal monsoon and government measures may help to ease inflation.