Mehta sees escalation in geo-political stress having some impact on India
FICCI President Sanjiv Mehta has welcomed the Reserve Bank of India’s (RBI) continuing accommodative stance on interest rates and is looking forward to the central bank’s discussion paper on Climate Risk and Sustainable Finance.
RBI has kept the repo rate unchanged at 4% for the 11th time in a row on 8 Apr 2022.
The reverse repo rate has also been kept unchanged at 3.35%.
This is the first bi-monthly policy for the current financial year 2022-23.
The statement on rates does allude to a withdrawal of accommodation clearly signaling towards normalization of liquidity management to ensure inflation remains within target, noted Mehta on 8 Apr 2022.
“There has been a considerable change in the economic scenario since the last policy announcement and we were expecting that the central bank will take due cognizance of the current situation. The significant escalation in geo-political stress since end February 2022 is undermining global recovery and some impact on India will be inevitable.”
The RBI has revised down India’s GDP growth estimate for 2022-23 to 7.2%. This is a significant downward revision from its earlier projection of 7.8% and, also lower than 7.4% GDP growth estimate put forth by FICCI’s latest Economic Outlook Survey.
“Inflationary pressures remain on fore, and we saw this getting reflected in the upward revision in inflation forecast for the current year. However, inflation in India is supply side driven, and we feel support from government in terms of fiscal measures such as reduction in excise duty and VAT on petrol/diesel by Centre and States can help mitigate immediate concern on inflation to some extent,” Mehta said.
“Moreover, we are glad to note that the RBI has extended the applicability of rationalized risk weights for all new housing loans to 31 March 2023 from 31 March 2022. The housing and real estate sector can be a force multiplier for growth and for kickstarting investments as these sectors have significant forward and backward linkages.
“We also look forward to the RBI discussion paper on Climate Risk and Sustainable Finance and will provide our perspective on the same once it is put out for public comments.
“Finally, with digital payments on the rise, there was a felt need to focus even more on the cyber security aspects related to digital payments. In this context, RBI’s announcement that it would issue detailed guidelines on Cyber Resilience and Payment Security controls for Payment System Operators is timely,” added Mehta. fiinews.com
