Is RSS pressurizing RBI to stop rate hikes?

New Delhi Union Finance Minister Nirmala Sithraman is keeping a close watch on the interest rates, while experts seen close to the government are arguing against an increase in the rate. The idea is to convince the Reserve Bank of India (RBI) that another rate hike would be a bad idea. It may be recalled that the RBI hiked the repo rate, which is the interest rate at which the central bank of a country lends money to commercial banks, by 250 basis points or 2.5 per cent between May 2022 and February this year.

The RBI’s Monetary Policy Committee (MPC) meeting is likely to be held in the first week of April. The MPC comprises three RBI officials and three external members. The government is trying to pressure the RBI to pause any hike, if not slash the rate, political sources told Bizz Buzz. The high interest rate regime followed soaring prices last year. Though retail inflation was still 6.44 per cent in February 2023, higher than RBI’s tolerance band of 4-6 per cent, the central bank expects it to decline in the near the first quarter of the next fiscal.

Therefore, the government thinks that RBI should not increase the repo rate at this juncture, the sources said, adding that the government is feeling pressure from the ground. Concern over the high interest rate was expressed at the recent meeting of the Akhil Bharatiya Pratinidhi Sabha (ABPS). The ABPS is the apex decision-making body of Rashtriya Swayamsevak Sangh (RSS). Heated debates took place during close-door deliberations of the ABPS. The ABPS’ recent meeting was held in Panipat, Haryana, earlier this month. It was attended by about 1,800 representatives of the various RSS bodies. Prominent among those clamouring for lower rates were the Laghu Udyog Bharti and the Swadeshi Jagran Manch. While the former represents micro, small and medium enterprises (MSMEs), the latter is focused on self-reliance and, more importantly, against foreign investment. Meanwhile the government has started building pressure on the RBI to give up the hawkish stance. For instance, Bibek Debroy, Chairperson of the Economic Advisory Council to the Prime Minister (EAC-PM), recently told a newspaper that inflation concerns do not warrant any additional interest rate increases. Further, economists and experts seen as sympathetic to the government are also arguing against any further increase in the repo rate.