RBI raises benchmark lending rate to 6.25%; GDP projection slashed to 6.8% for current fiscal year

Mumbai: The Reserve Bank on Wednesday raised the benchmark lending rate by 35 basis points to 6.25 per cent and marginally lowered the country’s GDP growth projection for the current fiscal at 6.8 per cent from its earlier estimate of 7 per cent.

In a bid to tame inflation, the Reserve Bank of India (RBI) raised the benchmark lending rate by 35 basis points to 6.25 per cent, which has remained above its tolerance level for the past 11 months.

With the latest hike, the repo rate or the short-term lending rate at which banks borrow from the central bank now has crossed 6 per cent.

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This is the fifth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August, and September. In all, the RBI has raised the benchmark rate by 2.25 per cent since May this year.

The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das decided by majority view in favour of the rate hike.

The Consumer Price Index (CPI) based inflation, which RBI factors in while fixing its benchmark rate, stood at 6.7 per cent in October. Retail inflation has been ruling above the RBI’s comfort level of 6 per cent since January this year.

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Das retained the inflation projection at 6.7 per cent for the current fiscal.

India to stay amongst fastest growing major economies

However, despite the downward revision in the economic growth projection, India will remain among the fastest-growing major economies in the world, said RBI Governor Shaktikanta Das while announcing the latest bi-monthly monetary policy.

He said the Indian economy remains resilient and is a bright spot in a gloomy world.

In its last bi-monthly policy review released in September, the RBI had slashed the economic growth projection for the current financial year to 7 per cent from 7.2 per cent earlier on account of extended geopolitical tensions and aggressive monetary policy tightening globally.

The World Bank on Tuesday revised upwards its GDP growth forecast for India to 6.9 per cent for 2022-23 from its earlier estimate of 6.5 per cent, saying the economy was showing higher resilience to global shocks.

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