RBI should continue with pause, change its stance to neutral: CII President

Says Indian economy likely to grow at 6.5-6.7% in FY24

The Reserve Bank of India (RBI) should continue with a pause in the key repo rate and change its stance to neutral, Confederation of Indian Industry (CII) President R Dinesh said on Thursday. 

This is warranted given the fast moderation in inflation falling to 5.3 per cent — within the RBI’s target range of 4-6 per cent — in FY24, Dinesh  said in his first press conference as the CII chief.

His recommendations come a week before the RBI’s Monetary Policy Committee review meeting slated for June 6-8. Inflation in April had slipped to an 18-month low of 4.7 per cent, inching closer to the 4 per cent target.

Dinesh said CII expected GDP growth to be in the range of 6.5-6.7 per cent in 2023-24 with CPI inflation falling within the RBI’s target range. He noted that 72 per cent of over 630 CEOs participating in the CII’s annual survey believed inflation would fall below the 5 per cent mark in FY24. 

His statements came a day after the GDP release that showed that the economy had outperformed, growing 6.1 per cent in the fourth quarter of FY23. The FY23 numbers were subsequently revised to 7.2 per cent.

In case of business-as-usual and oil at $85 per barrel, the growth is expected at 6.5 per cent. The upside to this forecast is 6.7 per cent if oil is at $70 per barrel, according to the CII.

Dinesh suggested setting up of a trade & investment promotion body with dedicated overseas offices to provide marketing services to Indian exporters which will help India achieve its target of $2 trillion in exports.

Fast-tracking free trade agreements (FTAs) with the UK, EU, Israel, GCC (Gulf Cooperation Council), and European Free Trade Association (EFTA), and undertaking policies for services export promotion will provide an impetus to growth of exports,” he said.

Emphasising on reforms, he said in order to ensure easy availability of land for industrial use, the India Industrial Land Bank (IILB), which is a GIS-enabled database of industrial areas/clusters across the country, may be evolved as the national-level land bank for not only obtaining information on land but also facilitating its acquisition.

To facilitate ease of doing business, the CII chief recommended setting up of cabinet secretary-monitored centralised online grievance redressal mechanism and providing all approvals through a national single window system.

Emphasising on lower cost of funds to finance India’s growth, Dinesh said: “If you need to have 7.5 per cent growth, the government needs to work towards financing growth via long-term funds and finding innovative avenues for growth capital from banks.”

The CII has decided to set up several task forces, including one on ‘Building Trust’ to be headed by its former president Uday Kotak. It will also this year set up Quality Mission 2.0 to be headed by CII President-Designate Sanjiv Puri.

The CII also plans to launch a national mission for advanced manufacturing to be headed by former CII president T V Narendran, who is managing director of Tata Steel.