With persistent inflation risks and robust economic growth, India, the world’s fifth-largest economy, saw its central bank maintain unchanged interest rates for the seventh consecutive week on Friday.
The benchmark “repo rate,” or the amount at which the central bank loans to commercial banks, will stay at 6.50 percent, according to the Reserve Bank of India (RBI).
This year, major central banks all across the world have hinted that rate cuts may be forthcoming.
Although it has been declining, India’s inflation rate is persistently higher than the Reserve Bank of India’s 4 percent target.
The government has also forecast a heatwave in several parts of the country, which would threaten to send food prices spiking.
Strong economic growth has also reduced the urgent need for a rate cut. India’s economy grew at a robust 8.4 percent in the December quarter with a surging manufacturing sector helping defy more modest analyst forecasts.
“Looking ahead, robust growth prospects provide policy space to remain focused on inflation and ensure its descent to the target of 4 percent,” said RBI governor Shaktikanta Das.
But “uncertainties in food prices continue to pose challenges”, he added, so that “monetary policy must continue to be actively disinflationary”.
After an increase of 2.5 percentage points in May 2022 to February 2023, interest rates have remained unchanged.
India’s retail inflation rate for the month of February was 5.09 percent, essentially unchanged from the previous month, mostly due to rising food costs.
The nation’s “core” inflation rate, which does not include the price of food and gasoline, stayed below 4 percent.
India is predicted by experts to have risen at the quickest rate among the major economies, ranging from 7.5 percent to 8 percent, during the fiscal year that concluded on March 31.
In February, New Delhi rejected populist spending in the final budget before the April 19 national elections, instead announcing a lower-than-expected fiscal deficit for the current fiscal year.
