The increase in Repo rate by 0.50 basis points, announced by the Reserve Bank of India, would have adverse consequences on the country’s economic growth, said Tamil Nadu Chamber of Commerce and Industry.
In a statement, Chamber president N. Jegatheesan said the move would increase interest rate on short-term loans, especially on home loans, auto loans, personal and gold loans as additional interest had to be paid every month.
The trade and industry and the general public, who had already suffered under severe financial crisis and inflation, would be pushed into an additional financial crisis, he said.
The impact of Ukraine-Russia war on global trade supply had been an obstacle to economic growth. The RBI had reasoned that the Repo rate was being raised to contain the ever-rising inflation. However, it had so far resulted in a sharp rise in interest rates on loans extended by banks and reduced liquidity, which had continued to affect the trade and industry and commercial sectors. Moreover, the Repo rate hike had had a huge impact on the stock market.
Most industries had been hit hard by the increase in the cost of production. The Repo rate revision would also increase the cost of production, and decrease liquidity and the purchase of manufactured goods, further aggravating the problems for the trade and industry such as high cost of funds, enhanced input and transportation costs and infrastructure inadequacies, Mr. Jegatheesan said.
