Mumbai | Jagran Business Desk: Union Finance Minister Nirmala Sitharaman on Saturday said that the recent repo rate hike by the Reserve Bank of India (RBI) was "not surprising" for her and the government but the timing was because it was done between two monetary policy reviews.
Addressing an award function organised by the Economic Times on Saturday evening, Sitharaman said the RBI in its last MPC meet had hinted that it's time for them to also act, and the hike was part of a synchronised action by major central banks across the globe.
"In a way, it was a synchronised action. Australia did it, and the US did it that night. So, I see a greater understanding among central banks nowadays. But the understanding of how to handle recovery from the pandemic is not fully unique or typical for only India. It's a global issue," she said, as reported by news agency PTI.
"And even as we handled that recovery, inflation, which was really festering... and festering at some unbelievable highs, let us say in the US and Britain, not so much in our country... Still, the challenge of recovery versus inflation seems to be following a particular template that's across the globe now," she added.
During her address, the Finance Minister further said the RBI's decision will not impact the Centre's planned huge infrastructure investments running into tens of billions of dollars.
On the economic sanctions against Russia after its invasion of Ukraine, she said the blockades were “constraining us” as traditional buyers from Russia were shifting to sources from the Indian basket of crude, 80-85 per cent of which is from the Middle East. This shift was likely to put more pressure on the Indian crude basket price.
"The sanctions have resulted in people rushing to alternative sources where countries like us are there for decades. Now suddenly it will be crowded with more people who want to buy the same thing. So, supply and price factors will now have its ramification on us," she said.
"In matters related to our oil consumption and buying it from the source which gives us a concessional rate, we've asserted our right in doing that. We've been explaining that we'll certainly purchase it, so it is something that hasn't been said for the first time. We'll go ahead with what is good for us. We need cheap fuel. If it is available, why won't we want to buy it," she added.
Last week, the RBI hiked the repo rate by 40 basis points (bps) to 4.40 per cent following an unscheduled meet. This was the first time since April 2018 when the RBI had hiked the repo rate.
It also hiked the cash reserve ratio by 50 basis points to 4.5 per cent in a bid to control inflation. However, Governor Shaktikanta Das said the inflation print in April is expected to remain high.
In March, the retail inflation print was recorded at 6.9 per cent.
"The MPC judged that the inflation outlook warrants an appropriate and timely response through resolute and calibrated steps to ensure that second-round effects of supply-side shocks on the economy are contained and long-term inflation expectations are kept firmly anchored," Das had said.
"In the MPC's view, monetary policy response at this juncture would help to preserve macro-financial stability amidst increasing volatility in financial markets," he added.
(With PTI inputs)
Posted By: Aalok Sensharma