Moderate the pace of monetary tightening: CII to RBI
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New Delhi, Nov 28: India Inc has begun to feel the adverse impact of RBI's interest rate hikes of 190 basis points in the current financial year, industry body CII said on Sunday, as it urged the central bank to consider moderating the pace of its monetary tightening ahead of the forthcoming policy. CII's analysis of results of 2,000-odd companies in the second quarter (July-September 2022) shows that both the top-line and bottom-line have moderated on a sequential and annual basis. Thus, moderation in the pace of monetary tightening is the need of the hour, it argued.
According to CII, domestic demand is recovering well as mirrored by the performance of a host of high-frequency indicators. However, the prevailing global 'polycrisis' is likely to impinge on India's 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," the industry body stated. While CII is cognisant of the fact that RBI's interest rate hikes of 190 basis points so far in this fiscal have been warranted to tame inflationary pressures, the corporate sector has now started to feel its adverse impact, it said. However, given the sticky core inflation at around the 6 percent mark, the RBI could consider hiking the key interest rates by an additional 25 to 35 basis points to tame inflation, it suggested. It pointed out that notwithstanding the recent moderation noted in the CPI headline print in October 2022, inflation continues to remain outside RBI's target range for 10 consecutive months. With a yawning gap existing between credit and deposit growth, an additional rate hike will incentivize savers, thus providing an impetus to deposit growth and helping narrow the credit-deposit wedge, the Confederation of Indian Industry (CII) said.
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Further, with rising global risk aversion adversely impacting our foreign capital inflows, CII stated that it poses challenges for financing India's current account deficit.