Rising oil prices to hit private consumption says Urjit Patel

Reserve Bank of India’ governor Urjit Patel said the recent increase in oil prices could impact private consumption adversely during the meeting of the Monetary Policy Committee held earlier this month, the minutes of which was released by the central bank on Wednesday.

In the June policy meeting, the six member MPC unanimously decided to hike the repo rate by 25 bps to 6.25% mainly due to rising inflation caused by sharp increase in oil prices.

“The recent increase in oil prices, by impacting disposable incomes, may have some adverse impact on private consumption,” Dr Patel said, the minutes showed.

RBI has increased the inflation projection for the fourth quarter of the current financial year to 4.7% during the June meeting as compared to the previous meeting held in April. According to Dr Patel while there are several uncertainties of the inflation path but a normal monsoon, by keeping food inflation benign, could act as a mitigating factor.

RBI’s deputy governor Viral Acharya, who in the April policy meeting had said the stance of the policy should be changed to ‘withdrawal from accommodation’ from neutral, said

considerable uncertainties him to keep the stance neutral in the June policy.

“It will allow the MPC to determine in a flexible manner what further monetary policy response is warranted based on an ongoing assessment of the inflation situation, inflation expectations and growth prints in the coming months,” he said.