CII urges RBI to moderate pace of interest rates hikes
NEW DELHI: India Inc. has begun to feel the adverse impact of Reserve Bank of India’s (RBI) interest rate hikes of 190 basis points in the current financial year, the Confederation of Indian Industry (CII) said on Sunday, as it urged the central bank to consider moderating the pace of its monetary tightening ahead of the forthcoming policy.
CII’s analysis of results of 2,000-odd companies in the second quarter (July-September 2022) shows that both the topline and bottom-line has moderated on sequential and annual basis. Thus, moderation in pace of monetary tightening is the need of the hour, it argued.
According to CII, domestic demand is recovering well as mirrored by the performance of a host of high-frequency indicators. However, the prevailing global ‘polycrisis’ is likely to impinge on India’s 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,” the industry body stated.
While CII is cognisant 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.
However, given the sticky core inflation at around the 6% mark, the RBI could consider hiking the key interest rates by an additional 25 to 35 basis points to tame inflation, it suggested.
It pointed out that notwithstanding the recent moderation noted in CPI headline print in October 2022, inflation continues to remain outside RBI’s target range for 10 consecutive months.
With a yawning gap existing between credit and deposit growth, an additional rate hike will incentivise savers, thus providing an impetus to deposit growth and help narrow the credit-deposit wedge, CII said.