Assocham: RBI’s repo rate hike: Right step to ring-fence economy from volatility, says Assocham

The RBI Monetary Policy Committee has rightly decided to ring-fence the Indian economy from volatility in the global financial markets and focus on bringing down inflation for achieving strong, sustainable growth, industry body ASSOCHAM said today, commenting on the 50 basis points upward revision in the policy repo rate to 5.4 percent.

”The revision in the repo rate seemed inevitable as the Central bank takes inflation head-on, along with concerted fiscal and policy measures from the government. India Inc., too. is playing its part in tackling inflation by improving performance efficiencies so consumers and end-users of products and services are less affected. In terms of RBI’s 7.2 percent GDP growth outlook, it is realistic. This level of growth in a turbulent global economy with inflationary pressures, supply chain disruptions, and energy challenges speaks very well about the inherent strength of the Indian economy, and the Centre’s handling of it,” ASSOCHAM president Sumant Sinha said.

The ASSOCHAM Slsecretary General Deepak Sood said, ”RBI’s emphasis on achieving a sustainable growth is the best way forward in the current state of global headwinds exacerbated by challenging geo-political situation, supply chain disruptions and cross-currency volatility. RBI’s priority to target inflation would eventually help all segments of the economy, building on improvement in consumer demand and pick-up in investment. Signs are already visible in terms of marked uptick in credit demand and other high frequency data”.

The chamber welcomed RBI governor Shaktikanta Das’ assurance that the RBI would be keeping a constant vigil on the liquidity position in the system even as it calibrates the withdrawal of the monetary accommodation that was brought following the outbreak of the Covid pandemic. The chamber expects credit demand to grow further with a robust revival in the services sector.

ASSOCHAM said the very recent correction in the crude oil prices below the USD 100 per barrel mark augurs well for the Indian economy and if the trend sustains, ”we may be in for a pleasant surprise”. It also shared RBI’s optimism on the external sector, expecting both merchandise and services exports to keep up the momentum. On the other hand, the import bill may come down with the easing of commodity prices.

The chamber said RBI’s regulatory decisions like widening the market makers’ choice for foreign currency would help both exporters and importers. Besides, facilitating the non-resident Indians to pay utility bills of their families back home, through Bharat Bill Payment System is a great customer-centric move. It would also improve NRI remittances.

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