Press Release

Unavoidable rate hike by RBI to lend support to financial/macro stability : ASSOCHAM

Unavoidable rate hike by RBI to lend support to financial/macro stability : ASSOCHAM

New Delhi, 8th June, 2022: The decision of the RBI's Monetary Policy Committee to raise the benchmark REPO rate by 50 basis points to 4.9 per cent is largely on the expected lines and seemed unavoidable, given the challenging global economic and geo-political situation marked by ultra  inflation and supply disruptions aggravated by the Ukraine-Russia war, said the apex industry chamber ASSOCHAM. 
 
''While the MPC has decided to withdraw the accommodative stance to rein in inflation, it also remains cognizant of the growth imperatives of the economy, retaining the policy rate below the pre-pandemic level,'' said ASSOCHAM Secretary General Mr Deepak Sood.
 
He said the ASSOCHAM would support the RBI Governor Mr Shaktikanta Das' suggestion that further reduction in State VATs on petrol and diesel across the country can contribute to softening of the inflationary pressures as well as expectations. This would follow the supply side measures by the Centre by way of reduction in excise on petrol and diesel along with other duty rationalisation measures on different commodities. 
 
The chamber noted several positives highlighted by the RBI's policy statement including  rising capacity utilisation in manufacturing, deleverating of corporate balance sheets , improvement in invest activity helped by government's capex push and increasing growth in the bank credit. Despite the challenging global environment, India's merchandise exports have remained robust. The country's overall financial stability and macro picture remain robust and strong with over USD 600 billion foreign exchange reserves.
 
It said while the inflation outlook, as emphasised by the RBI, remains elevated, projections of economic growth at 7.2 per cent for the current financial year may be exceeded, given the sharp recovery in the economic activities being witnessed across the sectors and the prospects of the normal Monsoon.
 
The chamber also complimented the RBI for relaxing regulatory requirements for the cooperative banks to extend finance to the commercial real estate and the housing sector. The measure would give a boost to the real estate and housing in the semi-urban and rural areas. Other measures like increasing the mandate of e-cards from Rs 5,000 to Rs 15,000 per transaction like insurance premium etc, proposal to link credit cards to UPI platform are pragmatic.