The latest RBI monetary policy announcement confirms the decision to keep the repo rate unchanged at 6.5 per cent as of August 10, 2023. This move marks the third consecutive pause on policy rates by the Central Bank and serves as a pragmatic approach to bolster domestic economic health. Consequently, India Inc., businesses, and policy experts welcomed the decision. They view it as a vital step toward building growth momentum while staying committed to bringing inflation within the target band. Although the action was expected, the retention of the rate signals a clear focus on ensuring sustainable GDP growth of 6.5 per cent.
Stability for the Exporting Community
For exporters, the stable RBI monetary policy comes at a crucial time. Businesses are currently exploring new markets and require financial stability amidst global economic challenges. Arun Kumar Garodia, Chairman of the Engineering Export Promotion Council, agrees that finance costs must remain stable. Furthermore, the slowdown in the world economy significantly impacted the engineering exports sector. Specifically, these exports conceded a year-on-year decline for the seventh month in a row in June 2023.
Balancing Inflation and Manufacturing Growth
While the US Fed and European Central Bank increased their interest rates, the RBI chose to maintain the status quo. Dr A. Sakthivel, President of the Federation of Indian Export Organisations (FIEO), notes that the RBI monetary policy struck a nice balance between inflation and growth. Additionally, the status quo helps exporters whose credit costs rose substantially over the last year. Consequently, this leads to a demand to increase interest subvention from 2 per cent and 3 per cent to 3 per cent and 5 per cent.
Bolstering Consumer Confidence and Retail
The automotive retail sector remains upbeat about the RBI’s focus on anchoring inflation at 4 per cent. Manish Raj Singhania, President of the Federation of Automotive Dealers Association, believes the consistent repo rate will benefit consumers significantly. This stability reinforces confidence among entry-level customers in both the passenger vehicle and two-wheeler segments. Therefore, the move acts as a bolstering force ahead of the festive season.
Private Investment and Digital Innovation
Deepak Sood, ASSOCHAM Secretary General, is optimistic that the RBI will ensure adequate liquidity in the banking system. He points to an uptick in capacity utilisation in the manufacturing sector and a revival of private sector investment. Moreover, the policy review encompasses a boost to infrastructure funding and transparency in EMI resetting. Innovative technology, such as enabling UPI with artificial intelligence, represents a major leap for the financial sector.
Fiscal Landscape and Risk Monitoring
The central government demonstrated proactive measures by front-loading its capital expenditure, which grew by 59.1 per cent during the first quarter of 2023–24. DK Srivastava, Chief Policy Advisor at Ernst & Young India, finds this provides reassurance for maintaining investment momentum. However, industry body FICCI voices a clouded outlook due to possible El Niño conditions. Subhrakant Panda, President of FICCI, advises careful monitoring of the global outlook while allowing previous interventions to flow through the system.
Courtesy: sundayguardianlive.com
