has increased the base interest rate by 3 percent, after which the interest rate has reached the highest level in the country’s history at 20 percent.
The State Bank has said in its ongoing statement that the State Bank of IndiaIn the meeting, it was decided to increase the basic interest rate by 3 percent keeping in mind the country’s economy.
In its statement, the State Bank said that the inflation rate has reached 31.5 percent on an annual basis in February 2023. Inflation has further increased due to recent monetary adjustments and exchange rate depreciation.
Inflation is expected to rise further over the next few months, but will gradually ease thereafter, with average inflation this year at 27-29 percent, while inflation is estimated at 21-23 percent in November 2022.
The central bank has said in this statement that the current account deficit has decreased to 242 million dollars in January 2023, which is the lowest deficit since March 2021.
The State Bank added that measures such as GST and excise duty hikes, reduction in subsidies, changes in energy prices and the recent austerity drive will help in reducing the widening fiscal and primary deficits. Financial stability is essential for stability.
Due to timely repayment of loans, rising global interest rates and uncertainty in the country, foreign exchange reserves and exchange rates are under pressure.
According to the central bank, the Monetary Policy Committee also assessed the impact of further monetary tightening on financial stability and the near-term growth outlook. The committee believes that there are risks to financial stability.
The Monetary Policy Committee reiterated its view that the short-term costs of reducing inflation are lower than the long-term costs of allowing it to strengthen. A tighter monetary policy will help curb inflation and reach the target of bringing inflation down to between 5-7 percent by the end of fiscal 2025.