Stating that global “polycrisis” can impact the domestic demand and growth prospects, India Inc has requested the Reserve Bank to slow down the pace of its rate hike in the upcoming monetary policy meet.
The corporate sector has also started to feel the adverse impact of the 190 basis points (bps) hike in repo rate so far in this fiscal, and so moderation in monetary tightening is the need of the hour, Confederation of Indian Industries (CII) said.
The next meeting of the Monetary Policy Committee (MPC) will be held from December 5 to 7.
“The domestic demand is recovering well as mirrored by the performance of host of high-frequency indicators, however, the prevailing global Polycrisis is likely to impinge on our growth prospects too.
“Given the headwinds to domestic growth mainly emanating from the global uncertainties, the RBI should consider moderating the pace of its monetary tightening from the earlier 50 basis points,” CII, an industry body, wrote to RBI in its expectation on the December monetary policy.
The six-member MPC has raised repo rate — the rate at which the RBI lends money to banks to meet their short-term funding needs — by 190 basis points (bps) to 5.9 per cent since May this year to check soaring inflation. A basis point is one hundredth of one percentage point.
The industry body said while it is in cognisance of the fact that RBI’s interest rate hikes of 190 bps so far in this fiscal have been warranted to tame inflationary pressures, the corporate sector has now started to feel its adverse impact. Analysis of results for 2,000 odd companies in the second quarter (July-Sept 2022) showed that both the top-line and bottom-line has moderated on sequential and annual basis. “Thus, moderation in pace of monetary tightening is the need of the hour,” it said. As consumer price-based inflation (CPI), or retail inflation, eased to 6.77 per cent in October from 7.41 per cent in September, many economists expect RBI to hike repo rate by 35 bps.