Stable repo rates will shield growth from supply shocks: Industry chamber
New Delhi, June 5
Industry chamber ASSOCHAM on Friday praised Reserve Bank of India's decision repo rate pause as steps to support trade and industry, as stable rate shields growth from supply‑side shocks.
Nirmal Kumar Minda, President, ASSOCHAM said stable interest rates "will support demand and potentially benefit investments, consumption, employment, and overall economic growth."
The "well-calibrated measures by the RBI will create a promising approach to growth and to control inflation," he added.
Measures such as bearing full hedging costs until September 30, 2026, restoring export proceeds to nine months, raising investment limits for NRIs and OCIs in listed equities without SEBI registration, and expanding the universe of 'specified securities' are "highly appreciable", Minda said.
Repo rate hikes are ineffective against supply‑side shocks, weaken economic growth drivers, the statement from ASSOCHAM said, adding there is no strong correlation between the repo rate and CPI when inflation is driven by supply-side shocks.
"At this juncture, the RBI's rational approach is highly commendable, as the rise in inflation is short-lived and will decline sharply once the conflict in West Asia is resolved," the statement added.
In the current global environment, marked by uncertainty and supply chain challenges, policy measures that improve supply conditions, enhance productivity, and ensure market stability will yield better outcomes.
Despite global headwinds, CPI Inflation projected at 5.1 per cent for the year 2026-27 is still below the upper band of 6 per cent, Minda noted.
The banking and financial system remains healthy, with strong credit growth, comfortable liquidity conditions, and banks and NBFCs maintaining adequate capital buffers. India's external sector also remains relatively stable, supported by strong services exports, remittances, and foreign exchange reserves of $682.3 billion.
RBI eased investment norms for foreign investors, expanded access to government securities, and promoted external commercial borrowings to strengthen capital inflows and support the balance of payments, the chamber said.
— IANS
Reader Comments
Finally some sensible approach from RBI. Supply side inflation cannot be tackled by increasing interest rates - that's basic economics. Hope small businesses also benefit from this stability.
Makes sense. With West Asia tensions affecting oil prices and supply chains, hiking rates would have been counterproductive. India's forex reserves of $682 billion provide a good cushion.
But I hope this doesn't mean inflation stays high for too long. Middle class families are already struggling with vegetable prices and fuel costs. Need more concrete measures to control prices.
Good to see RBI focusing on growth while keeping inflation within 6% band. The easing of norms for NRIs and foreign investors should bring in more capital. Smart move overall.
ASHOCAM ki baat sunke accha laga ki they understand ground reality. Stable rates ka matlab businesses can plan better. But agar Middle East crisis bada hua to phir situation change ho sakti hai.
I appreciate the balanced view - controlling inflation without hurting growth. The hedging cost support for exports is particularly good for our textile and IT sectors. Thik hai!
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