Considerable uncertainty around impact of MSP schemes, says RBI

The Reserve Bank of India (RBI) Deputy Governor Viral Acharya on Wednesday said that the impact of MSP hike on projections is a challenging task.

"Such an increase operates through multiple channels as there is a direct impact on the targeted food items. There could be impact on rural wages and then there could be generalization of all this through inflation expectations.

He added that the MPC's rate hikes in June and August will only play out in due course in their projections.

"It is proposed to set up an internal group to comprehensively review timings of various markets and the necessary payment infrastructure for supporting the recommended revisions to market timings," added Acharya.

The MPC which will hold its next meeting during the festive season from October 3 to 5, 2018, is likely to not see a rate increase.

The Reserve Bank of India (RBI) on Wednesday raised its repo rate by 25 basis points to 6.5 percent, keeping its focus firmly on taming inflation.

The six member Monetary Policy Committee (MPC) said that its decision is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 percent.