Press Release

Rate hike by RBI to result in sustainable growth: ASSOCHAM

Describing the 50 basis points increase in the REPO rate a decision on the expected lines, ASSOCHAM said it goes to the credit of the RBI for anchoring the country's monetary policy in a manner

New Delhi, 30th September, 2022: Describing the 50 basis points increase in the REPO rate a decision on the expected lines, ASSOCHAM today said it goes to the credit of the RBI for anchoring the country's monetary policy in a manner that ensures financial stability and maintains optimism about India's inherent strength ,braving a world full of financial turmoil, fear of recession and unabated inflationary outlook.

Mr. Sumant Sinha, Chairman, ASSOCHAM and CEO, ReNew Power. "The RBI’s decision to raise the repo rate by 50 bps to a 3-year-high shows its acute sensitivity to continued high retail inflation impacting households. It is the right measured move to tame prices and stem the continued rupee depreciation. India's robustly growing economy will absorb this hike with marginal impact on business activities, if at all. The RBI’s reduction in its GDP forecast to 7% from 7.2% is not surprising given global turbulence, including continuing high energy costs, the Ukraine conflict, broader inflationary trends, edgy markets and fluctuation in currencies worldwide. India still remains the world's fastest-growing major economy and the RBI continues to cushion this strong expansion well, despite significant global challenges."

The ASSOCHAM Secretary General Mr Deepak Sood said, ''Even as global headwinds persist, India is much better poised than its peers amongst the Emerging Market pack, both in terms of demand pick-up as also supply augmentation. Demand improvement and supply augmentation are the twin positives that would ensure a sustainable growth of seven per cent, as spelt out by the RBI Governor Mr Shaktikanta Das. The RBI is using the best of the monetary tools to anchor adequate liquidity while calibrating inflationary pressures''. The two measures are visible across agriculture, services and industry, more so ahead of the festive season. 

The ASSOCHAM said while the increase by 50 bps to 5.90 per cent in the policy rates is bound to see a rise in the borrowing costs for the industry and the household borrowers, it would be balanced by the easing of inflation over the medium term. There are several external factors at play simultaneously which have to be dealt with by the RBI and the government. '' Both RBI and the government are working in perfect coordination to keep the impact of external volatility at the minimum, be it on the foreign exchange rates, fiscal situation or the overall macro-economic stability'', the chamber said.

The chamber welcomed the RBI decision to introduce a framework for securitisation of stressed assets, beyond the existing route of the Asset Reconstruction Companies (ARCs). "While the banks have managed well to reduce their Gross and Net NPAs, the stress in the system needs several transparent, well-defined measures to deal with the ups and downs of the business cycles. ASSOCHAM is all for such measures''.

Improved internet banking by the regional rural banks would further take the benefits of Digital India to the rural landscape. The chamber also welcomed regulatory path for the offline payment aggregators by the RBI.