RBI should adopt neutral policy stance as inflation cools: CII’s Dinesh
The Confederation of Indian Industry (CII) president R. Dinesh on Thursday said the time is right for the Reserve Bank of India to move to a neutral monetary policy stance as inflation expectations have cooled, and called for building consensus on critical pending reforms in sectors like labour, land, power and agriculture.
The new president said CII expects GDP growth to be in the range of 6.5% to 6.7% in 202324, adding that reforms such as a universal GST with a rationalised threerate structure and improving contracts’ enforcement could spur growth higher to average 7.8% in the 8year period till 203031, compared with the 6.6% average between 2012 and 201920.
“We are recommending that the RBI shift its stance to neutral considering that we are better placed than the rest of the world in terms of inflation expectations,” Mr. Dinesh said.
As per a CEOs’ survey by CII, almost 72% of corporates expect inflation to moderate to less than 5% this year. “While we do understand the necessary actions had to be taken, we believe this [continued pause in the key repo rate and a shift from the hawkish stance] will be a further tailwind for us,” he said.
Mr. Dinesh indicated that India’s investment rate, as measured by gross capital formation to GDP, which stood at 31.1% in 202223, may reach or surpass the fiveyear high of 33.9% hit in 201718 over the near to medium term.
“While headwinds such as the global slowdown, tepid FDI flows, higher borrowing costs could impinge on growth, we believe the tailwinds like the strong public capex and sustained domestic demand will outstrip the headwinds,” he averred.