Raising inflation in India become concern for indian economy and as predicted on May 4, the Reserve Bank of India (RBI) governor announced that key policy rates have been hiked. As per the announcement made, the RBI has hiked repo rate by 40 bps up to 4.40% from 4% earlier. 

The last time repo rate was cut was in May 2020 and has been kept unchanged since then. Hike will come into effect immediately. Further, the Cash Reserve Ratio (CRR) has been hiked by 50 bps which will exert further upward pressure on interest rates. 

As a result  appears that borrowers should prepare for an increasing EMI burden and FD investors can hope for better returns on new FDs. 

In order to control inflation further Union Finance Nirmala Sitharaman made the announcements on Twitter on saturday 

graph 1.jpg

These including a sharp cut in central excise duty on fuel prices, Subsidy for domestic gas cyclinders and Fertilizer subsidy and Import Duty cut for  Steel and few plastic products 

The announcements come as retail inflation surged to an eight-year high in April, driven by rising fuel and food prices

Excise duty cut by ₹ 8 per litre on petrol, by ₹ 6 per litre on diesel. This will reduce the price of petrol by ₹ 9.5 per litre and of diesel by ₹ 7 per litre after taking into account its impact on other levies.

A fertiliser subsidy of ₹ 1.10 lakh crore, which will be in addition to the ₹ 1.05 lakh crore in this year’s budget.

A subsidy of ₹ 200 per gas cylinder to over 9 crore beneficiaries of Pradhan Mantri Ujjwala Yojana. 

A 14.2-kg LPG cylinder costs ₹ 1,003 in Delhi. Pradhan Mantri Ujjwala Yojana beneficiaries will get ₹ 200 subsidy directly in their bank accounts and the effective price for them would be ₹ 803 per 14.2-kg cylinder.

Reduction on the customs duty on raw materials and intermediaries for plastic products where India’s import dependence is high.

Due to rise in cost of Construction materials Import duty on some raw materials of steel will be reduced. Export duty to be levied on some steel products.

However Oppostion parties in India critise these anouncements as piece meal and criticise Modi led BJP union goverment for current economic mess that lead to high  inflation