Premature rollback of easy money policy can jeopardise growth, says the survey

The present headline inflation rate is likely to continue for a couple of months more before settling between 6 per cent and 8 per cent by December in the estimation of the Federation of Indian Chambers of Commerce and Industry (FICCI).

In its latest Economic Outlook Survey, FICCI underlined that the present level of price line was unlikely to change in the immediate future as increase in fuel prices was yet to play itself out fully in the economy having led to the rise in transportation cost for primary articles coupled with the sticky food inflation situation and the depreciation of the rupee which negated any meaningful reflection of lower global prices in metals on inflation in India. The chamber was of the opinion that inflation would take a downward trend post-September and predicted that it would settle in the 6-8 per cent range by the end of the year against the government's projection of 5 per cent. The survey expects primary inflation to cool down from August and manufactured articles inflation would look downwards from November. Other internal and global factors too were expected to play a role by then.

Majority of FICCI members are anticipating the Reserve Bank of India (RBI) to hike repo and reverse repo rates by 25 basis points when it reviews its monetary policy on July 27. But the chamber does not expect the RBI to raise the Cash Reserve Ratio (CRR) given the present liquidity situation.

It also underscored the danger of frequent changes in policy rates derailing the growth momentum.

The survey felt that premature and aggressive rollback of easy money policy could jeopardise growth. It predicted an annual gross domestic product (GDP) growth of 8.5 per cent.

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