Kolkata: Will EMIs on your car loan, personal loan or home loans go up? This is the question on the lips of millions of common Indians as the rate-setting
Monetary Policy Committee of the RBI is supposed to wrap up its meeting and announce its decision. Along with the common man, markets, investors banks and companies are eagerly waiting to know the decision. RBI Governor Sanjay Malhotra will announce the monetary policy at 10 am. This meeting is considered crucial amid rising crude oil prices and a weakening rupee. Investors are closely watching for signals related to interest rates, inflation, and economic growth. The six-member MPC began deliberations on June 3.
The challenge at hand
The RBI is mandated with the task of fixing interest rates to respond to inflationary trends in the economy. While the US-Iran war has raised the cost of crude oil in the global markets to multi-year highs, the Indian government has opted for a rise in retail prices of petrol and diesel only after May 15. However, there has been four hikes of a total of about Rs 7.5 a litre, which is certainly going to raise retail inflation levels significantly in May. Since the war began on Feb 28, the oil marketing companies have raised the prices of LPG cylinders — both domestic and commercial — more than four times.
The RBI governor will brief the country on detailed information on interest rates, inflation, economic growth, and future policy direction.
Inflation and growth
In its last review in April, the RBI projected India’s economic growth rate to be 6.9% for FY27. Retail inflation projection was also raised to 4.6%. This time, the market is eager to see what new assessments the central bank will offer regarding inflation, global challenges, and economic activity.
Rupee vs dollar
Another big challenge that the economy is facing is the fast sliding value of the rupee against the US Dollar. There is a huge demand of the dollar since almost all imports have to paid for in dollars, and India needs to import almost 90% of its crude oil, the price of which has risen from about $70 a barrel to about $100 now and was higher than $110 a barrel for a large part of the last 100 days. This is resulting in a huge drainage of dollars and a fast rise of the currenta ccount deficit of the country. The fall of the dollar is both importing inflation into the country and creating many other problems for the economy. It remains to be seen whether the RBI governor announces any measure to contain the slide of the Indian currency.
