“Necessary Step In Right Direction,” Says Finance Secretary On RBI Rate Hike

TV Somanathan said the Center is taking several steps to ensure control over the prices of fertilizers.

New Delhi:

The government said that the Reserve Bank of India (RBI) has taken a mandatory step by raising the key interest rate. “Necessary step in the right direction,” Finance Secretary TV Somanathan told NDTV on Thursday.

The Reserve Bank on Wednesday raised the repo rate by 40 basis points (bps) to 4.40 per cent in an off-cycle meeting. Repo rate is the rate at which a central bank lends money to banks.

The RBI’s rate hike decision is aimed at containing the rising inflationary pressures. The central bank had maintained status quo on key policy rates for almost two years due to the ongoing COVID-19 pandemic.

Asked about the Centre’s measures to control inflation, Mr. Somanathan said, “The government is already taking a lot of steps to keep fertilizer prices under control and increase subsidies. We have implemented the Garib Kalyan Yojana. Under this, the allocation of food grains has also been increased.

Retail inflation hovered around 7 per cent in March and remained above the upper end of the RBI’s target band of 2-4 per cent for the third consecutive month.

RBI Governor Shaktikanta Das said the sharp rise in inflation to 7 per cent in March was specifically due to the impact of food inflation and unprecedented high global food prices.

“The decision to hike the repo rate was taken in view of rising inflation, geo-political tensions, high crude oil prices and global commodity shortage, which have affected the Indian economy,” Mr Das said.

On the global front, the US Federal Reserve has also raised the benchmark lending rate by half a percentage point in its ongoing effort to contain inflation, the highest in four decades. After a quarter-point increase in March, the US central bank pushed the rate above 0.75 percent.

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