Economy showing signs of resilience despite global uncertainties
FIEO President Dr A Sakthivel said the Reserve Bank of India (RBI) 5 Apr decision to maintain repo rate at 6.5% will further boost growth through increasing investment.
“While most Central banks have given more weightage to inflation as compared to growth, RBI stroke a nice balance between the two, giving primacy to growth,” he said, welcoming the central bank’s latest policy announcement.
Dr Sakthivel said that the increasing investment will lead to further production and easing of supply thus reducing the inflation in next couple of months.
The status quo in rates will also help our exporters whose cost of credit has gone up substantially due to upward revision in rate in last one and half year leading to the demand to increase the interest subvention from 2% and 3% to 3% and 5%, respectively.
The pause in policy repo rate by RBI is a welcome move given the evolving macro-economic and financial markets scenario, says FICCI President Subhrakant Panda, welcoming the central bank’s policy decision while other trade officials see the move good for investments.
“The renewed phase of turbulence that Central Banks are grappling with globally given developments in the banking sector, geo-politics and slowdown in growth & trade flows warranted a prudent response which RBI has delivered,” he said on 6 Apr 2023.
“While the Indian economy is showing signs of resilience with growth being broad based, the outlook globally is somewhat uncertain.”
RBI’s measured stance articulated on 5 Apr is appropriate as earlier rate hikes are still flowing through the system, and inflation is projected to trend downwards, albeit slowly; any further hike in the policy rate at this juncture would have affected growth, which must be the priority while keeping a close watch on the inflation trajectory, Panda believes.
RBI maintained the repo rate at 6.5%, when US Fed has raised the rate by 25 basis points last fortnight. Most people were expecting RBI to follow the suit, according to Dr Sakthivel.
The World Bank has lowered India’s growth forecast for 2023-24 to 6.3% from its December estimate of 6.6% amid global headwinds and with rising borrowing costs and slower income growth leading to a moderation in consumption.
The bank’s country director Auguste Tano Kouame noted that the Indian economy continues to show strong resilience to external shocks.
Likewise, the Asian Development Bank says Indian’s economy would grow at a slower-than-expected 6.4% this year.
Both the multilateral agencies estimates are close to RBI’s February 8 forecast of 6.4% growth in 2023-24.
The Economic Survey on January 31 projected India’s GDP growth at 6.5% in real terms, with a broader range of 6-6.8% depending on downside and upside risks. fiinews.com
