The central board of directors of the Reserve Bank of India (RBI) on Fridayreviewed the impact of the Ukraine conflict on the economy. The meeting was chaired by RBI governor Shaktikanta Das and attended by deputy governors Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, and T. Rabi Sankar.
The other board members present were Satish K. Marathe, S. Gurumurthy, Revathy Iyer and Sachin Chaturvedi. Ajay Seth, secretary, department of economic affairs, and Sanjay Malhotra, secretary, department of financial services, attended the meeting.
“The Board in its meeting reviewed the various areas of operation of the bank and the current economic situation, global and domestic challenges including the overall impact of the geopolitical crises,” the RBI said without going into details.
The meeting, held in Bangalore, comes just days ahead of the meeting of the monetary policy committee (MPC) which is scheduled to deliberate from April 6 to April 8. While analysts expect a status-quo at least in the policy repo rate, they are divided on whether the interest rate setting body will revise the reverse repo rate now at 3.35 per cent and alter the accommodative stance to neutral.
The focal point will be on the panel’s forecast on growth and inflation. Many experts have questioned the MPC’s dovish forecast in its February meet where it projected 4.5 per cent inflation for the next fiscal.
Retail inflation in February crossed the 6 per cent mark for the second consecutive month to touch an 8-month high of 6.07 per cent. Inflation is expected to remain firm as crude oil prices have surged following Russia’s invasion of Ukraine and the subsequent sanctions imposed by various nations.
While Brent crude price briefly fell to around $100 per barrel (after almost touching $140 a barrel), they have again inched up and are trading at around $117 per barrel. its February meet, the RBI had forecast CPI inflation to be at 4.5 per cent and real GDP growth at 7.8 per cent for the next fiscal. Both Das and Patra have indicated that these projections will be revised.
However, in a recent interaction with the CII, Das expressed optimism that inflation will moderate and it will not keep on exceeding the upper bound of 6 per cent. He said there will not be any spill-over effects on India due to the current crisis and that it is comfortably placed to manage any challenge arising from the geo-political situation. The Board also discussed its activities during the current accounting year and it approved the budget for the year.
