Finance Minister Nirmala Sitharaman said the recent interest rate hike by the Reserve Bank of India (RBI) was not surprising to her, but the timing was right, saying the rising cost of funds is not will have no impact on the infrastructure investments planned by the government.
For the first time since August 2018, RBI had, on May 4, sharply increased the key repo rate by 40 basis points to 4.40%, and also increased the cash reserve ratio by 50 basis points. to 4.5% after an unscheduled rate setting meeting. panel, citing increased inflationary pressures following the Russian-Ukrainian war and the resulting spike in crude oil prices.
“Retail price inflation came in at 6.9% in March and the April reading is expected to top 7.7%. The timing of the RBI’s rate hike was a surprise, but not the action itself, because people thought it should have been done anyway. It came as a surprise because it’s between the two meetings of the Monetary Policy Committee (MPC). But the US Fed l ‘said all the time,” Sitharaman said in her first reaction to the rate hike as she addressed an awards ceremony in Mumbai on Saturday night.
Read also :
She said that at the last MPC meeting, the RBI had indicated that it was time for them to act as well, and that the hike was part of a synchronized action by major central banks around the world. In a way, it was a synchronized action. Australia did it, and the United States did it that night. So I see more understanding between central banks these days. But the understanding of how to handle pandemic recovery is not entirely unique or typical for India alone. It’s a global problem.
“And even while we were managing this recovery, inflation, which was really getting worse and escalating to unbelievable heights in, say, the United States and Britain, not so much in our country. .. Yet the challenge of recovery versus inflation seems to follow a particular pattern that now exists around the world,” she said. However, she was quick to assert that the decision to the central bank will have no impact on the huge infrastructure investments planned by the government, which amount to tens of billions of dollars.
Regarding the economic sanctions against Russia after its invasion of Ukraine, she said the blockades are constraining us as traditional Russian buyers turn to sources from the Indian basket of crude, 80-85% of which comes from the Middle East. . This change was likely to put more pressure on the price of the Indian crude basket. Sanctions have caused people to rush to alternative sources where countries like us have been present for decades. Now suddenly it will be crowded with more people who want to buy the same thing. So the supply and price factors will now affect us, she said and clarified that India would continue to buy rough wherever it was available cheaply.
“In terms of our consumption of oil and buying it at the source which gives us a preferential rate, we have asserted our right to do so. We have explained that we will definitely buy it, so it is something that does not It wasn’t said for the first time. We’ll carry on with what’s good for us. We need cheap fuel. If it’s available, why won’t we want to buy it?” , she said.
Sitharaman said that even before the war there had been an increase in fertilizer prices. The government had to seek additional spending approval during additional demands due to rising crude oil and rising commodity prices due to supply disruptions.