CII's Chandrajit Banerjee startled by RBI's repo rate hike

Chandrajit Banerjee, Director General of CII is reportedly surprised by the RBI's decision to increase the repo rate despite all indicators suggesting that a status quo was in order.

In a press release, Banerjee said that while CII recognised the overwhelming concern of the monetary authorities to keep inflation under check, it expected RBI to take cognizance of the faltering investment and consumption demand, which is preventing the economy from realising its growth potential.

He further said that India had entered a cycle where high interest rates are leading to subdued demand conditions resulting in lower growth and investment, which in turn was aggravating the supply bottlenecks and adding to inflationary pressures thereby inducing the RBI to hold on to higher interest rates.

However, the CII director general said that this circularity could be broken through a change in monetary policy stance.

At a time when growth slowdown is getting entrenched across sectors and industrial production is at a low, Banerjee said that the CII strongly advocated a shift towards an accommodative monetary policy stance, sooner rather than later.

He said that this was an opportune time to accord precedence to growth over inflation especially as prices were trending downwards, core inflation is within the comfort zone of the RBI and inflationary expectations are not unduly high in view of a robust performance by the agriculture sector.