The Reserve Bank of India is expected to further increase the policy rates today to rein in the runaway inflation. Globally, too, with spiralling inflation, real interest rates in many countries remain negative, indicating that central banks would have to hike interest rates further.
As India is vulnerable to both food and fuel inflation, a judicious policy mix is needed to drive private consumption, which has shrunk to 56.4% of GDP in FY22 from pre-pandemic level of 60.5%; rising rates will cause it to shrink further, affecting growth, investments and job creation.
