RBI MPC meet key highlights: Repo rate hiked by 35 bps, GDP growth projection lowered to 6.8%

Reserve Bank of India (RBI) raised the benchmark lending rate on December 7 by 35 basis points to 6.25 percent in a bid to tame inflation, which has remained above its tolerance level for the past 11 months. With the latest hike, the repo rate or the short-term lending rate at which banks borrow from the central bank now has crossed 6 percent.

This is the fifth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August and September. In all, the RBI has raised the benchmark rate by 2.25 per cent since May this year.

RBI governor Shaktikanta Das retained the inflation projection at 6.7 percent for the current fiscal. The RBI has slashed its GDP growth forecast to 6.8 percent from an earlier estimate of 7 percent for the current fiscal. In its last bi-monthly policy review released in September, the RBI had slashed the economic growth projection for the current financial year to 7 per cent from 7.2 per cent earlier on account of extended geopolitical tensions and aggressive monetary policy tightening globally.

Despite the downward revision in the economic growth projection, India will remain among the fastest growing major economies in the world, said RBI Governor Shaktikanta Das while announcing the latest bi-monthly monetary policy. 

 He said the Indian economy remains resilient and is a bright spot in a gloomy world. It is to be noted that the RBI had also pared its growth projection in September as well. The World Bank on Tuesday revised upwards its GDP growth forecast for India to 6.9 per cent for 2022-23 from its earlier estimate of 6.5 per cent, saying the economy was showing higher resilience to global shocks.

The six-member Monetary Policy Committee (MPC) headed by RBI Governor Shaktikanta Das decided by majority view in favour of the rate hike. The Consumer Price Index (CPI) based inflation, which RBI factors in while fixing its benchmark rate, stood at 6.7 percent in October. Retail inflation has been ruling above the RBI's comfort level of 6 percent since January this year.