Major industry and commerce bodies have expressed hope that with Thursday's key rates revision, the RBI would pause on its monetary policy underscoring those efforts to control inflation threatened to disrupt the growth trajectory.
The Confederation of Indian Industry felt that with the repo rate at 6 per cent, the process of normalisation should be over and hoped that the RBI would pause in the second review of monetary policy scheduled in October.
It felt that sustaining the current growth rate would require a moderate interest rate environment and expressed concern that with banks raising lending rate, industry might find it difficult to fund capacity expansion and render some existing projects unviable.
Associated Chambers of Commerce and Industry of India President Swati Piramal too hoped that it would be the last of rate hikes for the time being though it tended to increase the lending rates.
Supply side constraints
Expressing her anxiety over the existing inflationary pressure, Ms. Swati maintained that the supply side constraints needed to be addressed.
Federation of Indian Chambers of Commerce and Industry Secretary General Amit Mitra too felt that the policy action raised concern over the likely direction of growth trajectory.
Mr. Mitra said the increase in the reverse repo rate by 50 basis points was tantamount to incentivising the banks to put more money in RBI's coffers as against lending more to potential investors and charged that it was not a growth related signal and would deter investments at the margin.
Cost of borrowing
The 25-basis point increase in the repo rate, according to him, was a signal to banks to raise the cost of borrowing and the twin moves were not consistent with the spirit of not disrupting growth
PHD Chamber said the changes would affect the cost of borrowing, especially by small and medium enterprises, besides the export sector.