On the RBI rate hike, Finance Secretary said it’s a “necessary step in the right direction.”

The administration claims that hiking the key interest rate by the Reserve Bank of India (RBI) was a necessary step. On Thursday, Finance Secretary TV Somanathan told NDTV, “Necessary step in the correct path.”

In an off-cycle meeting on Wednesday, the Reserve Bank hiked the repo rate by 40 basis points (bps) to 4.40 percent. The rate at which a central bank loans money to banks is known as the repo rate.

The decision by the RBI to raise interest rates is intended to combat rising inflationary pressures. Due to the prolonged Covid-19 epidemic, the central bank had kept key policy rates unchanged for over two years.

When asked about the Centre’s efforts to keep inflation under control, Mr Somanathan responded, “The government is already taking steps to keep fertiliser costs under control and raise subsidies. Under the Garib Kalyan Yojana, we have also enhanced food grain allocation.”

For the third month in a row, retail inflation exceeded the upper limit of the Reserve Bank of India’s target zone of 2-4 percent.

According to RBI Governor Shaktikanta Das, the sudden increase in inflation to 7% in March was fueled in part by food inflation and the impact of unprecedented high global food prices.

“The decision to raise the repo rate was made in light of rising inflation, geopolitical concerns, high crude oil prices, and global commodity shortages, all of which have had an impact on the Indian economy,” Mr Das explained.

On the global front, the Federal Reserve of the United States has increased the benchmark lending rate by a half percentage point as part of its continuous battle to curb the greatest inflation in four decades. The Federal Reserve of the United States raised the interest rate by a quarter-point in March, bringing it over 0.75 percent.