RBI must moderate pace of monetary tightening: CII

MUMBAI: Given the headwinds to domestic growth mainly emanating from the global uncertainties, the RBI should consider moderating the pace of its monetary tightening from the earlier 50 basis points, Confederation of Indian Industry (CII) said on Sunday.

The industry body said while it is in cognisance of the fact that RBI’s interest rate hikes of 190 basis points so far in this fiscal have been warranted to tame inflationary pressures, the corporate sector has now started to feel its adverse impact.

“CII’s analysis of results for 2000 odd companies in the second quarter (July-Sept 2022) shows that both the top-line and bottom-line has moderated on sequential and annual basis. Thus, moderation in pace of monetary tightening is the need of the hour,” a statement from CII said.

However, given the sticky core inflation at around the 6% mark, the RBI could consider hiking the key interest rates by an additional 25 to 35 basis points to tame inflation, it added.

“Notwithstanding the recent moderation noted in CPI headline print in October 2022, the headline print continues to remain outside RBI’s target range for ten consecutive months. Further, with a yawning gap existing between credit and deposit growth, an additional rate hike will incentivise savers, thus providing an impetus to deposit growth and help narrow the Credit-Deposit wedge,” the statement said. Further, with rising global risk aversion adversely impacting our foreign capital inflows, CII stated that it poses challenges for the financing of our current account deficit.