India’s policy rate rises by 50bps as greater upside risks to inflation emerge

The Reserve Bank of India (RBI) increased the repo rate by 50bps, to 5.4% p.a., as the monetary policy committee took note of the deteriorating global economy and a steady recovery in domestic demand. At the global level, monetary tightening continued as the US Federal Reserve hiked rates by 75bps.

In addition, the continued war in Europe has triggered a greater risk of recession, which has triggered global financial markets to undergo volatility and large selloffs. On the domestic front, both headline and core inflation eased in June, the fall in the latter being more pronounced as the benefits of the excise duty reduction on petrol and diesel surfaced. While crude oil prices have climbed off their peaks, spillovers from geopolitical shocks continue to impart uncertainty to the inflationary trajectory. The growth outlook remains strong as the domestic economy has displayed resilience with an uptick in the industrial and services sectors. 

Further data and analysis on India’s economy are available on the CEIC India Economy in a Snapshot – Q2 2022 report.