Sign in Subscribe
Banking industry

India's Central Bank Raises Interest Rates for Third Time in Four Months

Strategic Insights

— 1 min read

India's central bank has hiked interest rates for the third time in four months, as the country's economy grapples with a widening trade deficit and a weakening currency. The Reserve Bank of India (RBI), led by Governor Shaktikanta Das, raised its key lending rate by 50 basis points to 5.40 per cent, a level last seen in August 2019. The RBI attributed the decision to successive shocks to the global economy, including surging inflation and lower global growth, as well as the globalisation of inflation coinciding with de-globalisation of trade.

Key Takeaways:

  • The RBI raised its key lending rate by 50 basis points to 5.40 per cent, a level last seen in August 2019.
  • The move is the third interest rate hike in four months, aimed at tackling a widening trade deficit and a weakening currency.
  • RBI Governor Shaktikanta Das attributed the decision to successive shocks to the global economy, including surging inflation and lower global growth.
  • The International Monetary Fund has slashed India's growth outlook for the ongoing financial year ending in March 2023 to 7.4 per cent from the 8.2 per cent forecast in April.
  • The Indian rupee has depreciated sharply to below 80 against the US dollar, its lowest level on record, with a broad dollar rally contributing to the decline.
  • The rupee has fared "much better" than other emerging market currencies, depreciating 4.7 per cent against the US dollar since April 1.

Statistics:

  • 50 basis point interest rate hike by the RBI.
  • RBI's key lending rate is now at 5.40 per cent, a level last seen in August 2019.
  • The Indian rupee has depreciated by 4.7 per cent against the US dollar since April 1.
  • The rupee's lowest level against the US dollar on record is below 80.
  • The International Monetary Fund's revised growth outlook for India is 7.4 per cent for the ongoing financial year ending in March 2023.
  • The original growth forecast in April was 8.2 per cent.

Sources:

  • "India's central bank raises interest rates for third time in four months" - Economic Times (No date provided)
  • "Shaktikanta Das: RBI governor gives short shrift to globalisation of inflation worries" - Business Standard (No date provided)
  • "IMF slashes India growth forecast to 7.4% for 2023-2024" - Bloomberg (No date provided)
  • RBI Press Release (No date provided)

Read more