RBI has increased policy rates Repo Rate and Reverse Repo Rate by 25 basis points. Now the key policy rates are bank rate 6%, Repo rate 5% and Reverse Repo Rate 3.5%.
As expected, the central bank of India has started tightening the monetary policy to tam the inflationary pressure on economy. This month or next the general lend rates are going to increase. And this will not be good for the reviving economy; which has started show its strength.
We have seen increase in petroleum products price and expect some more such hike in current future specially in gas and kerosene price. Milk and other food items are showing upward price movements. These hikes and movements are now increasing the inflationary pressure in non-food articles as well. This is anyhow not good for the overall economic growth.
We do need to take care of inflation but by what route is always tricky. The realty sector and long durable sector has just started reviving the demand and it pick season is in offing. At this juncture RBI has increases the borrowing rate. This will hurt the demand in these sectors. It will quite difficult for the companies to increase their top line. This is a negative incentive