CCI urges RBI to moderate pace of interest rate hikes
Indian firms have started feeling “adverse impact” of ongoing monetary tightening by the Reserve Bank of India, Confederation of Indian Industry (CII) said in statement, proposing the central bank to moderate its approach while raising policy rates to tame inflation next month.
“The domestic demand is recovering well as mirrored by the performance of host of highfrequency indicators, however, the prevailing global Polycrisis is likely to impinge on our growth prospects too. Given the headwinds to domestic growth mainly emanating from the global uncertainties, the RBI should consider moderating the pace of its monetary tightening from the earlier 50 basis points,” CII said ahead of the RBI’S monetary policy committee (MPC) meeting scheduled on December 5-7, 2022. one basis point (bps) is one hundredth of a percentage point.
While CII is in cognisance of the fact that RBI’S interest rate hikes of 190 basis points so far in this fiscal have been warranted to tame inflationary pressures, the corporate sector has now started to feel its adverse impact, it said.
In order to check rising inflation, RBI resorted to tightening of interest rates by raising repo rates -- by 40 bps in May, and 50 bps each in June, August and
September.
After India’s retail inflation, as measured by the Consumer Price Index (CPI), surged at 7.8% in the month of April 2022, RBI raised repo rate sharply by 40 bps in May an off-cycle meeting of PMC, and thereafter, hardening of interest rates continued.
CII’S plea came at a time when CPI inflation fell below 7% at 6.77% in October, which is significantly low compared to the September print of 7.41%, but still far away from the Reserve Bank of India’s upper tolerance limit of 6%.
“CII’S analysis of results for 2000 odd companies in the second quarter (July-sept 2022) shows that both the top-line and bottom-line has moderated on sequential and annual basis. Thus, moderation in pace of monetary tightening is the need of the hour,” the CII statement said.