Indian industries urge RBI to consider moderating pace of rate hikes
New Delhi, November 27, 2022
In order to reduce the multi-year high inflation, the RBI has increased the policy repo rate by 190 basis points since May of the ongoing fiscal year
Ahead of the upcoming monetary policy, the Confederation of Indian Industry (CII) has requested the central bank to take into account reducing the pace of rate hikes, reported Livemint.
According to CII, almost 2,000 enterprises experienced a deceleration in their top- and bottom-line performance during the September 2022 quarter on a sequential and yearly basis, highlighting the need to slow down the tightening of monetary policy.
In order to reduce the multi-year high inflation, the RBI has increased the policy repo rate by 190 basis points since May of this fiscal year.
The top line and bottom line have moderated on a sequential and annual basis in the second quarter (July-September 2022), according to CII's study of the results of 2,000+ enterprises, said PTI report, according to Livemint. Therefore, it is imperative that the pace of fiscal tightening be moderated.
According to CII, a number of high-frequency indicators are performing strongly, reflecting the fact that domestic demand is recovering well. However, India's development potential may also be impacted by the current global "polycrisis."
The industry body added that the RBI should think about slowing the pace of its monetary tightening from the previous 50 basis points in light of the obstacles to the domestic economy that are mostly caused by global uncertainties.
In a telephone interview with PTI last month, RBI Monetary Policy Committee (MPC) member Jayanth R Varma stated that the MPC is prioritising inflation for now and working to bring inflation under control before moving on. He further said that it takes the monetary policy five to six quarters to start cooling prices.
In an unscheduled policy meeting in May, RBI started the rate hike cycle. The Russia-Ukraine conflict, which broke out in February, caused the world economy to experience, among other things, inflationary pressures, skyrocketing crude oil prices, energy problems, supply-chain disruptions, and sharp reserve reductions. Since May, the RBI has increased interest rates four times in a row, increasing the policy repo rate by 50 basis points three times in a row. The current repo rate is 5.9 per cent. The tightening of the monetary policy by the RBI was done to combat inflationary pressure.
[The Business Standard]