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Pre-emptive strike: on RBI’s repo rate hike

At the end of an unusually long three-day meeting, the Monetary(मौद्रिक ) Policy(नीति ) Committee(समिति) of the Reserve Bank of India opted(चुनना/विकल्प चुना) for a hike in key interest rates by 25 basis points — the first such increase in four and a half years. This hike, the first during this NDA government’s tenure, was approved unanimously(सर्वसम्मति से) by the six-member committee, citing worries about hardening(सख्त ) inflation(मुद्राप्रसार/मुद्रा-विस्तार) trends and a firming(मजबूती) up of growth recovery at home. Global uncertainties(अनिश्चितताओं) affecting emerging markets in particular have played a role as well — be it rising tensions over trade wars initiated(आरंभ करना) by the Donald Trump administration or the strengthening dollar or further rate hikes by the Federal(संयुक्त/संघीय) Reserve that could strengthen(प्रबल करना/मजबूत बनाना) the exodus of global capital from emerging markets such as India. Already, between January and May, outflows from foreign portfolio investors have reached their highest level in 10 years, and by June 4, $6.7 billion was pulled out on a net basis from the domestic capital market. The rupee, along with other emerging(उभरना) market currencies, is hurting too, but RBI Governor Urjit Patel dismissed suggestions that the rate hike was a bid to stem outflows. The MPC, he asserted(दावा करना/इस बात पर जोर,), is driven purely by its inflation management mandate, and there is no contradiction between the rate hike and the committee sticking to its neutral policy stance.

To be sure, while retaining(बनाए रखने की/रोक रखना) its growth projections for 2018-19 at 7.4%, the MPC has revised (संशोधित)upwards its inflation projections for the year since its April meeting — from 4.7-5.1% in the first half and 4.4% in the second half to 4.8-4.9% and a significantly higher 4.7%, respectively. This should worry a government gearing for parliamentary elections next year. Though seasonal food inflation spikes are delayed, input cost pressures have hardened owing to a spurt in global commodity(वस्तु) prices, led by fuel. Moreover, inflationary expectations among producers as well as consumers have gathered steam. Crude oil prices have been the biggest factor at play, rising 12% from $66 a barrel when the MPC met in April to $74 a barrel. The committee said this rise is “sharper, earlier than expected and seems to be durable”, and termed it a major upside risk to its earlier inflation projections. Industry has expressed concern, but effective borrowing rates and bond yields(राज़ी होना/पैदावार) had been firming up even before this rate hike. The government has, surprisingly, welcomed the RBI’s stance as one that could help steady the markets and dampen uncertainties. The RBI’s neutral stance, as Mr. Patel pointed out, allows it to keep all options open. But a reversal in rates is unlikely till global headwinds clear up and the mandarins in New Delhi work out a viable strategy to minimise the inflation transmission from global oil prices that is exacerbated(तीव्र करना) by their taxation policy for fuels.

Important Vocabulary

Synonyms: boom, expansion, hike, rise, aggrandizement
Antonyms: abridgment, compression, decrease, reduction, deflation

2.Initiated(आरंभ करना)
Synonyms: proposed, admitted, entered, inserted, instituted

3.Asserted(दावा करना/इस बात पर जोर,)
Synonyms: affirm, allege, argue, cite, claim
Antonyms: abandon, conceal, deny, desert, hide

4.Retaining(बनाए रखने की/रोक रखना)
Synonyms: accommodating, arresting, cherishing,, commemorating,, confining

5.Revised (संशोधित)
Synonyms: adjusted, amended, improved, updated, altered
Antonyms: kept

Synonyms: collectively, commonly, consistently, universally, agreeingly
Antonyms: differently, divergently, opposite



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