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India stands out as fastest growing economy, but RBI should halt any more rate hike: ASSOCHAM President Ajay Singh

With the Reserve Bank of India (RBI) Monetary Policy Committee (MPC) set to review the benchmark policy rates, apex industry chamber ASSOCHAM has urged the central bank's Monetary Policy Committee for a halt to any more hike in the lending rates in the wake of uncertainties in the global business environment.

New Delhi, April 4 th , 2023: Addressing his maiden press conference after taking over as the  ASSOCHAM President, Mr Ajay Singh dealt with several key issues confronting the Indian industry, including the overall economic outlook, inflationary pressures and several unfolding opportunities for the young entrepreneurs as the country leverages the technology-led economic expansion with large job potential.

He said, though India remains the fastest growing nation amongst the major economies, the growth is uneven even as the global headwinds from volatile energy prices, geo-political developments and threat of recession in major economies need to be watched with abundant caution.

It is in this context that the ASSOCHAM is calling for a halt to any further rise in the interest rates, unless there is a radical change in circumstances.

“There are suggestions in some quarters about another 25 bps increase in the REPO rate by the RBI Monetary Policy Committee, we feel the economy has reached a saturation point beyond which it may be difficult to absorb any more rate hike.  Rate sensitive sectors like real estate including residential complexes, passenger cars, commercial vehicles may see negative impact of the rate hike, said the new
ASSOCHAM President said.

ASSOCHAM Secretary General Mr Deepak Sood said, “so far, the RBI has responded well to the external rate hike without pressing any panic button. However, about a 250-basis point increase in the policy rate since May last year, has started exerting pressure on the consumers as also corporations’’.

Mr Sood said, India is on the cusp of an opportunity to become a manufacturing hub for the global giants. Those wanting to diversify into India or expand their operations here should be provided all the policy support in terms of their vendor development programme, meeting their raw material requirements etc.

The country stands out as a performer even in the midst of a tough global economic and geo-political environment. Having grown by seven per cent, the Indian economy is projected to register 6.5 per cent expansion in the FY'24.

Manufacturing of several hi-tech products, for example in electronics would require the entire value chain which may not be available completely here at this point of time. The value addition right up to the final products should be encouraged. With this approach, the Make in India would get a big lift and the objective of a USD 5 trillion economy by 2025 can be realised.

India has made great strides in the Digital India drive and along with the financial inclusion of 60 crore new bank accounts of the economically weaker sections of society, all the building blocks are there for reaching further penetration.

In 2022, 8840 crore digital transactions took place in the country with UPI accounting for 52 percent.  Total value of digital transactions was Rs 126 lakh crore.

Talking about the MSMEs, Mr. Ajay Singh further said most of them are  in the services sector, notably trade , street vendors, restaurant owners, small transport operators and job contractors or medium sized companies. While the FinTech’s are fast reaching out to them, they need to be supported in terms of accessing their high-end tech platforms like AI both for working capital as also marketing support.  The MSMEs can thus access and leverage AI based platforms for promoting their businesses. This would also lead to further formalisation of the economy.

Like in the case of MSMEs, technologies like AI should be leveraged for food management, both production and supply. Technology platforms should link farmers, FMCG companies, small distribution channels, state governments and the central ministries of food and consumer affairs, earth science, agriculture and farmers welfare and rural development as chemicals.

By sheer nature, agriculture is highly vulnerable to climate; excessive or deficit rains, extra temperature or cold weather can affect the production. . We often run into either the 'problem of plenty' or 'problem of shortages’, helping no one in the value chain. The technology interface should help resolve several such problems.

This is critical and we are hopeful that the accelerator on the government capex programme would be maintained. The Centre has provided Rs 10 lakh crore as capital expenditure on different infrastructure programmes in the Budget for 2023-24. As the Finance Minister Mrs Nirmala Sitharaman had told us at the ASSOCHAM  post-Budget interaction that the implementation on the ground would be key. We share her optimism and expect the revenue buoyancy as is being seen in monthly GST collections (Rs 1.61 lakh crore for March)  GST collections of Rs 18.1 lakh crore for the entire fiscal 2022-23 grew by 22 per cent Y on Y. This would give enough elbow room to the government to maintain the capex and deal with any unforeseen 'external shock'


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