Today, the RBI announced its upcoming monetary policy and mentioned key factors in the country's economic growth. According to RBI Governor Shaktikanta Das, India's forex reserves have been reported to be the fourth largest globally. In today's official statement, RBI mentioned, "Overall system liquidity continues in surplus, with average daily absorption under the LAF at Rs. 3.8 lakh crore during June-July. Money supply (M3) and bank credit from commercial banks rose (y-o-y) by 7.9% and 14.0%, respectively, as on July 15, 2022. India's foreign exchange reserves were placed at US$ 573.9 billion as on July 29, 2022."
On that ground, Das stated, "Financial sector remains well capitalized, and India's forex reserves provide insurance against global spillovers." RBI Governor also said that the Indian economy is "holding steady and progressing in an ocean of turbulence and uncertainty".
Today, the RBI has increased the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 5.40% with immediate effect. The RBI MPC decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.
However, the International Monetary Fund recently cut India's growth outlook for the current financial year that is FY23 to 7.4% from the 8.2% noted in the earlier forecast in April, this year.
According to RBI's statement, CPI inflation eased to 7.0% (year-on-year) during May-June 2022 from 7.8% in April, although it persists above the upper tolerance band. Food inflation has registered some moderation, especially with the softening of edible oil prices, and deepening deflation in pulses and eggs. Fuel inflation moved back to double digits in June primarily due to the rise in LPG and kerosene prices.