The Reserve Bank of India has retained India's growth projection of 7.2 percent for the current financial year, a day after the World Bank cut India’s FY23 growth forecast to 7.5 percent. It is noteworthy that the National Statistical Organisation (NSO) on May 31 projected India's 2021-2022 expected growth at 8.7 percent.

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The RBI Governor Shaktikanta Das cited a slew of reasons as to why he is optimistic about India's growth. He stated that the April and May recovery had shown good growth impulses getting broad-based.

"Available information for April-May 2022 indicates a broadening of the recovery in economic activity. Urban demand is recovering, and rural demand is gradually improving. Merchandise exports posted robust double-digit growth for the fifteenth month in a row during May while non-oil and non-gold imports continued to expand at a healthy pace, pointing to a recovery of domestic demand," read Das's statement.

The governor pointed out the impact of high inflation and, thus, the growth challenges, especially due to the disruptions being caused by the Russia-Ukraine war.

Policy-wise, the Monetary Policy Committee (MPC) has decided to hike the repo rate by 50 basis — the key interest rate at which the central bank lends money to banks.

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The RBI's Monetary Policy Committee voted unanimously and has decided to go for a "withdrawal from accommodative stance".

The latest RBI action comes at a time when central banks are faced with the Herculean task of taming inflation without slowing down economic growth.

S K Ghosh, Group Chief Economic Advisor to SBI, said, "MSP hike for the Kharif crops, there will be an upside pressure of 15 to 20 bps on inflation."

On May 4, Das had announced the MPC's decision to hike the repo rate from a record low to 4.4 percent and to lift the cash reserve ratio (CRR) — the amount of cash commercial banks are required to keep parked with the RBI — by 50 bps to 4.5 percent.

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(Edited by : Abhishek Jha)

First Published:Jun 8, 2022 10:23 AM IST