Reacting to the RBI’s decision of increasing the repo rate by 40 basis points to 4.4 percent and CRR by 50 basis points to 4.5 percent at a time, when world economy including India is reeling under inflationary pressures, Dr A Sakthivel, President, FIEO said that this was on expected line looking at the current and evolving macroeconomic situation and expected increase in the key rates by the US Federal Reserve. Dr Sakthivel welcomed the initiative taken by the Central Bank of the country, as it will not only help in containing inflation but will also support the economic growth process including exports. However, at the same time RBI should ensure that it neither affects the credit flow nor the interest burden on MSMEs and exporters and if required, the Interest Equalisation Scheme may enhance the support to insulate against any rate hike.
With agencies like IMF and WTO already scaling down their global output growth and world trade forecast coupled with disruptions, shortages and escalating prices due to geopolitical tensions and sanctions, steps taken to contain excess liquidity from the system thereby reducing commodity and raw material/input prices, will help the trade and industry in containing their overall cost of production, added FIEO President.
FIEO Chief reiterated that as the Indian economy appears capable of sustaining such geopolitical conditions, the decision of both hike in repo rate and cash reserve ratio will help in reducing pressure on demand front. This is further help in ensuring adequate liquidity in the system to meet the productive requirements of the economy in support of credit off take growth.
