India Inc unhappy over rate hikes

 “The successive and frequent hikes as observed recently run the risk of slowing down industrial growth, particularly manufacturing sector,” Ficci President Rajan Bharti Mittal said reacting to revised monetary policy unveiled by the RBI.

He said “this is a huge surprise as general expectation was at most 25 basis points increase in both rates as RBI had raised both the rates as recently as July 2.”

The reverse repo increase will incentivize parking of funds by banks with RBI thus reducing lending opportunities to industry.

Reserve bank’s reaction though understandable is worrisome as there is always an underlying fear of the rate hike eventually leading to increase in lending rate, Mittal warned saying high borrowing cost is an impediment to business performance. But CII said “in the current context this is on expected lines as there is a definite and calibrated stance taken by RBI to contain inflation and inflationary expectations.”

Supply constraints

CII Director General Chandrajit Banerjee said the chamber is keen that the supply side issues are addressed effectively to ensure that going forward growth is not affected by supply constraints.

Assocham President Swati Piramal apprehended that “lending rates may go north by 25-50 basis points, making bank’s borrowings a little more dearer since repo rate and reverse repo rate have been hiked.”

Federation of Indian Exporters Organization (FIEO) said increase in key rates might impact interest regime thereby increasing the cost of credit which, if happened, would disappoint   industry.