India needs to raise policy interest rates: State Bank
Inflation is now high in India as well as around the world. Food prices seem to be on fire. As a result, India’s retail inflation rose to 7.95 percent in March. For three consecutive months, the rate is above the tolerance limit set by the Reserve Bank.

Inflation is unlikely to fall below that level in the near future, given the state of prices of various commodities and raw materials, according to a report by the research arm of the State Bank of India. According to their forecast, the inflation rate may rise further to 6 percent by September. In the second half of the financial year, it may come down to around 8.5 percent. This news has been found in the sources of Economic Times.

In this situation, the economists of the State Bank think that raising the interest rate in the next two lending policies of the Reserve Bank is practically inevitable. Earlier, Aditi Nair, chief economist at Icarus, an assessment firm, had earlier suggested the same possibility.

According to a large section of the Indian intelligentsia, despite the sharp rise in inflation in March, the impact of petrol and diesel prices has not yet been felt; On the contrary, it can be seen in the statistics for the month of April

The main reasons for the rise in inflation last month were the prices of wheat, protein (especially chicken), milk, refined oil, potatoes, chilies, firewood and cooking gas. The Russia-Ukraine war has added to the pressure on food prices. For example, the import of chicken feed from Ukraine is being hampered. Inevitably the price of chicken has gone up. It has affected the price of meat. The trade policy of sunflower oil is to be changed. The report claims that since October 2021, the impact of petrol and diesel on inflation has decreased, while the price of kerosene and firewood has increased. Its use may increase in the near future, which is not good news for rural areas at all.

The report also said that the cost of cultivation could increase by 8 to 10 percent due to the rising prices of raw materials in the agricultural sector. In that case, it could have an impact on the minimum support price of agricultural products, which may increase at a higher rate than other years. All in all, the RBI may have to raise interest rates by 25 basis points in its June and August lending policy to curb the pace of inflation. And in the whole financial year, it can increase by 65 basis points.

It is noteworthy that the central banks around the world are moving in this direction to curb inflation – the Federal Reserve, the Bank of England, all have raised policy interest rates.