Responding to the RBI’s decision of increasing the repo rate by 50 basis points to 4.9 percent at a time, when the global economies including India is reeling under inflationary pressures, Dr A Sakthivel, President, FIEO said that this was expected looking at the current and evolving macroeconomic situation. 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 especially exporters and if required, the Interest Equalisation Scheme may enhance the support to insulate against any rate hike.
With agencies like IMF, World Bank 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 hike in repo rate along with the Standing Deposit Facility (SDF) to 4.65 percent, the Marginal Standing Facility (MSF) and the Bank Rate to 5.15 percent, will further help in reducing pressure on demand front. This will help in ensuring adequate liquidity in the system to meet the productive requirements of the economy in support of credit offtake growth.
