MUMBAI/NEW DELHI: The Reserve Bank of India’s (RBI) decision to raise interest rates will not impact government’s planned infrastructure investment and the hike was part of an action synchronization of major central banks around the world to face the twin challenges of taming inflation and supporting economic recovery, Finance Minister Nirmala Sitharaman said on Saturday. At the Economic Times Awards for Corporate Excellence in Mumbai, Sitharaman said the timing of RBI’s rise was a surprise, but not the stock itself.
Finance Minister Nirmala Sitharaman on Saturday described the RBI’s surprise decision to raise its key rate by 40 basis points on Wednesday as a kind of “synchronized action” with other central banks.
“In a way, it was a synchronized action. Australia did it, and the United States did it that night. So I see a greater understanding between central banks these days. And obviously, when they meet at the World Bank, there is a lot of discussion. But the understanding of how to handle pandemic recovery is not entirely unique or typical for India alone. It is a global problem,” Finance Minister Nirmala Sitharaman said.
The FM said sanctions on Russia are “constraining India” as traditional Russian buyers shift to sourcing part of India’s basket of crude, 80-85% of which comes from the Middle East. This change was likely to put more pressure on the price of the Indian crude basket.
“The sanctions have made people rush to alternative sources where countries like India have been present for decades. Now suddenly it will be crowded with more people who want to buy the same thing. So the supply and price factors will now have their ramifications on us,” she said.
The FM has made it clear that India will continue to buy crude oil wherever it is available at low prices.
“In terms of our consumption of oil and buying it from the source which gives us a preferential rate, we have asserted our right to do so,” Sitharaman said. “We explained that we will definitely buy it, so it is something that has not been said for the first time. We will go ahead with what is good for the country. We need good fuel market. If it’s available, why won’t we want to buy it?” FM said.
Sitharaman said that even before the war there had been an increase in fertilizer prices. The government had to seek additional spending approval during additional demands due to rising crude oil and rising commodity prices due to supply disruptions.