The hike in interest rates was not surprising, the timing was there: Finance Minister Sitharaman

Finance Minister Nirmala Sitharaman said the recent interest rate hike by the Reserve Bank was not surprising to her, but the timing was that rising cost of funds would not affect the government’s planned infrastructure investments.

For the first time since August 2018, the RBI raised the key repo rate by a blunt 40 basis points to 4.40% on May 4, and raised the cash reserve ratio by 50 basis points to 4.5% after an unscheduled meeting of the rate. Panel, citing the increase in inflationary pressures after the Ukraine war and the resultant rise in crude oil prices.

Retail inflation printed at 6.9% in March and is projected to top the April reading of 7.7%.

“The timing of RBI’s rate hike came as a surprise, but not the action itself as people thought it should have been done anyway. This came as a surprise as it is between two MPC (Monetary Policy Committee) meetings. But the US Fed was saying it all the time,” Ms Sitharaman said in her first reaction to the rate hike, while addressing an awards ceremony. economic times Saturday evening in Mumbai.

She said that in the last MPC meeting, the RBI had indicated that it was time for them to act as well, and the hike was part of a synchronized action by major central banks across the world.

“In a way, it was a synchronized action. Australia did it, and the US did it that night. So, I see more understanding among central banks nowadays. But understanding of how to recover from the pandemic is only for India. Not entirely unique or exclusive. This is a global issue.”

“And even as we handled that recovery, inflation that was really celebratory, and celebratory at some incredible heights, let us say in the US and UK, not so much in our country… Nevertheless, the challenge of inflation versus recovery appears to be adhering to a particular template that is now in place across the world,” she said.

However, he quickly added that the central bank’s decision would not affect the government’s ongoing large infrastructure investments worth billions of dollars.

Feather economic sanctions against russia After the invasion of Ukraine, she said the blockade was “disrupting us” as Russia’s traditional buyers were shifting sources from the Indian basket of crude, 80-85% of which is from the Middle East. This change was likely to put more pressure on the price of the Indian crude basket.

“The sanctions have resulted in people fleeing to alternative sources where countries like ours have been for decades. Now suddenly there will be more people who want to buy the same thing. So, supply and price factors will have an impact on us now,” she said, clarifying that India will continue to buy crude from wherever it is available cheaply.

“In matters relating to our consumption of oil and buying it from a source that gives us a discounted rate, we have claimed our right to do so. We’re explaining that we’ll definitely be buying it, so it’s something that hasn’t been said the first time. We will pursue what is good for us. We need cheap fuel. If it’s available, why wouldn’t we want to buy it?

Ms Sitharaman said that even before the war, the prices of fertilizers had increased. The way crude oil was accelerating and the rise in commodity prices due to supply disruptions had forced the government to approve additional spending during supplementary demands.