India Inc worry over rising fund cost
Impact of past rate hikes and liquidity tightening measures are yet to be seen. Thus, there is a risk of over-tightening the monetary policy and hurting growth recovery at a nascent stage, say experts; RBI monetary policy announcement today
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Chennai: With the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) expected to revise upwards the interest rate on Wednesday, industry players are voicing out for a moderation. The MPC has hiked the interest rate in recent times by 190 basis points (bps) to contain the inflation.
According to Shishir Baijal, Chairman and Managing Director, Knight Frank India, out of 190 bps repo rate hike, 105 bps rise has already been transmitted in the marginal cost of funds based lending rate (MCLR).
"The mortgage rates have increased in line with the MCLR and the cumulative growth in residential sales in the last six months has understandably begun showing some signs of slowing," Baijal said.
According to Baijal, the affordability of the home buyers has also reduced by 10 per cent since the beginning of this interest rate hike cycle. Referring to the Q2 FY23 GDP print, Baijal said except for the service sector, a degrowth was seen in most of the core sectors such as industry, manufacturing and others.
"Hence, with inflation potentially showing signs of ebbing and growth concerns coming to the fore, we expect the RBI to hike its repo rate by a comparatively subdued 30-35 bps in the upcoming MPC meeting," he added.
Industry lobby body Assocham recently had made a similar request to RBI Governor Shaktikanta Das. At most, the new rate hike should not exceed the 25-35 bps band, Assocham said in a letter to Das.
Several economists too have said the repo rate hike will be in the 25-35 bps band. According to a report from State Bank of India (SBI), the RBI rate hike will be in smaller magnitude attuned to emerging market central banks and the overall rate setting tone.
