Active Stocks
Mon May 27 2024 15:59:11
  1. Tata Steel share price
  2. 175.50 0.40%
  1. NTPC share price
  2. 369.60 -1.40%
  1. State Bank Of India share price
  2. 834.10 0.66%
  1. HDFC Bank share price
  2. 1,527.95 0.75%
  1. ICICI Bank share price
  2. 1,129.15 -0.19%
Business News/ Economy / Experts fear rate hike may dampen consumption, invest hope on resilient economy

Experts fear rate hike may dampen consumption, invest hope on resilient economy

The Reserve Bank of India (RBI) hiked the repo rate to 5.90% on Friday; the hike was in line with the tightening policies across the economies as expected by experts. Here is what different experts have to say about the hike

RBI increased the repo rate by 50 basis points to 5.90% (HT_PRINT)Premium
RBI increased the repo rate by 50 basis points to 5.90% (HT_PRINT)

The Reserve Bank of India (RBI) raised the repo rate on Friday by 50 basis points to 5.90%, although the increase was consistent with the tightening policies across economies, as predicted by experts.

With another RBI rate hike looming large in the next Monetary Policy Committee (MPC) meet, it is expected to dampen consumption in the medium term, reducing GDP growth prospects and impacting mortgages, with rates returning to pre-Covid levels from the rise in funding cost.

On the other hand, other experts expressed optimism about the Indian economy's resilience in light of the unstable global economy and concerns about the slowdown,

Many experts voiced their opinion on the rate hike and tried to ascertain the implication of the step taken by RBI.

Vijay Kalantri, chairman, MVIRDC World Trade Center, Mumbai, said; "We expect liquidity to tighten in future if RBI continues to intervene in the forex market to support the rupee, which may continue to face depreciation pressure as the interest rate differential between USA and India, which was as high as 4% in March 2022, has declined to 2.9% today (Friday)."

MVIRDC World Trade Center is an international trade promotion organisation.

The increase in India's policy interest rate, he continued, was anticipated to slow down consumption over the medium term and lower expectations for GDP growth in FY23 to below 7%. However, Kalantri stated that he anticipates continued strong bank credit growth, driven by production-linked incentive (PLI) schemes and an increase in industry capacity utilisation.

Santosh Meena, head of research, Swastika Investmart, said: "The key highlights were the resilience shown by the Indian economy considering the turbulent global environment and concerns emanating from global growth slowdown & hawkish stances of various central banks,"

He further said that inflation was witnessing a downward trajectory, nonetheless, the reduction in GDP growth forecasts was one of the let-downs in the overall commentary.

Showing optimism, Parth Nyati, founder, Tradingo, said: "It is important to note that despite the global headwinds, the governor's view on the Indian economy is constructive. However, to ensure that the current recovery sustains, the government needs to increase spending. Key concerns mentioned in the commentary were global & geopolitical uncertainties..."

Brokerage and research firm, Elara Capital's economist Garima Kapoor said: "Going forward, the domestic monetary policy may continue to be driven by the global monetary tightening cycle with aggressive stance of Federal Reserve reducing our degrees of freedom."

Explaining how it would impact the real estate sector, Shishir Baijal, chairman and managing director, Knight Frank India, said: "Tight liquidity conditions along with the repo rate hike would lead to a significant rise in the cost of funding, impacting home loan rates as well. Going by the current trends we expect about 50% of this will be passed onto the home loan borrowers. A rise in home loan rates will further impact affordability across the markets."

He continued by saying that the Knight Frank affordability index would decline by an additional 2%, which might shorten the decision to buy a home by a few months to a year.

Amarendra Sahu, founder & CEO, NestAway Technologies, said: "With this hike, the rates have gone up by 190 bps cumulatively this calendar year alone. The hike in rates will push up the rates for homebuyers, further affecting housing affordability."

He claimed that the upward trend in rates would likely last longer than anticipated due to the trend of the workforce returning to the workforce and the increase in economic activity.

KV Srinivasan, executive director & CEO, Profectus Capital, said: "While most countries are also facing falling growth rates, India has remained an exception with GDP growth projected at 7%. While cost of capex is likely to increase, I don't believe this will impede the capex cycle as Indian industry especially MSMEs (micro, small and medium enterprises) has the capacity to absorb this."

(With inputs from ANI)

You are on Mint! India's #1 news destination (Source: Press Gazette). To learn more about our business coverage and market insights Click Here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 30 Sep 2022, 10:42 PM IST
Next Story footLogo
Recommended For You