New Delhi: The Reserve Bank of India’s (RBI) move to hike key policy interest rates come as a surprise because it was done between two monetary policy reviews, Finance Minister Nirmala Sitharaman said.
“It is the timing which came as a surprise to many, but the act people thought should have been done anyway – to what extent could have varied,” she said at The Economic Times Awards for Corporate Excellence in Mumbai yesterday. “It came as a surprise because it came between two monetary policy reviews.”
For the first time since August 2018, RBI had on May 4 delivered a blunt 40 basis points increase in key repo rate to 4.40 per cent, and also hiked the cash reserve ratio by 50 basis points to 4.5 per cent after an unscheduled meeting of the rate setting panel, citing increased inflation pressures following the Ukraine war and the resultant spike in crude oil prices.
Retail inflation printed at 6.9 per cent in March and the April reading is forecast to top 7.7 per cent.
The Finance Minister, who received an award at the event for her handling of the country’s economy through the pandemic, noted that the RBI had in its April policy review indicated that it was time to act on inflation.
The minister also said it makes “perfect sense” to buy oil from Russia if it’s being offered at a discounted rate, particularly with inflation on the rise.
“I thought we have been spending a lot of time explaining India’s position, not just on the abstentions (on Ukraine) when voting took place (at the United Nations), but also on the fact that if Russia is offering it to us at a discounted rate, we will still be buying it because it makes perfect sense, particularly when the world is stressed out with inflation,” she said.
“I think we’ll go ahead with what is good for the country. We need cheaper fuel. If it is available, why won’t we want to buy it? We will buy it,” the minister added.
Sitharaman said even before the war, there was an increase in prices of fertilisers. The government had to seek extra spending approval during the supplementary demands because of the way crude oil was playing up and the rise in commodity prices due to supply disruptions.