RBI decision to raise interest rate to ringfence economy from global headwinds: Chambers

The RBI policy decision to raise the key interest rate will “ringfence” the economy from global headwinds and preserve growth impulses, industry chambers said on Friday. The central bank on Friday raised the key interest rate by 50 basis points, the third straight increase since May in an effort to cool stubbornly high inflation and defend the rupee. The repurchase (repo) rate was raised by 50 basis points to raise the interest rate to the pre-pandemic level. The 5.40 percent repo rate was last seen in August 2019.

Also Read: What RBI MPC’s 50bps repo rate hike means: Inflation to stay above comfort zone; another 50bps hike on cards?

The RBI Monetary Policy Committee has rightly decided to ringfence 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. “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 the marked uptick in credit demand and other high-frequency data,” Assocham Sumant Sinha said. Ficci President Sanjiv Mehta said the uncertainty on the external front remains on the front. Nevertheless, the central bank has retained the growth forecast for 2022-23 at 7.2 percent – which is encouraging.

“We further hope that as inflation ebbs, RBI will dynamically manage its monetary policy stance and continue to support growth impulses in the economy,” he added. President of PHD Chamber Pradeep Multani said the volatility in global financial markets is leading to imported inflation in India, however, retail has eased in the recent two months but still remains uncomfortably high and above the RBI’s target level. Going forward, he said any further increase in the repo rate will affect India’s economic growth due to the impact on the demand scenario and consumer and business sentiments.

Also Read Repo rate hike to have a moderate impact on residential sales: Experts

On the RBI’s decision, IMC President Anant Singhania said allowing NRIs to make cross-border payments on the Bharat Bill Payment System of NPCI is a laudatory initiative that will strengthen the payments ecosystem and benefit consumers. Sriram Mahadevan, Managing Director, Joyville Shapoorji Housing Private Limited, opined that while an increase in home loan rates is likely to have an impact on the sector, “we believe the home loan rates even now are at very reasonable levels of 6.65 per cent onwards “. This kind of home loan rates was there a few years ago, Mahadevan added.

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