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The Confederation of Indian Industry (CII) on Sunday urged the central bank to consider moderating the pace of rate hikes ahead of the forthcoming monetary policy. CII mentioned that somewhat 2,000 odd companies faced moderation in both the top-line and bottom-line front during September 2022 quarter on a sequentially and annual basis --- indicating the need to abate monetary policy tightening. Since May of this fiscal year, RBI has hiked the policy repo rate by 190 basis points to tame multi-year high inflation.

As per the PTI report, CII's analysis of results of 2,000-odd companies in the second quarter (July-September 2022) shows that both the top-line and bottom-line have moderated on a sequential and annual basis. Thus, moderation in the pace of monetary tightening is the need of the hour.

CII stated that domestic demand is recovering well as mirrored by the performance of a host of high-frequency indicators. However, the prevailing global 'polycrisis' is likely to impinge on India's growth prospects too.

Further, the industry body stated that on the back of the headwinds to domestic growth mainly emanating from global uncertainties, the RBI should consider moderating the pace of its monetary tightening from the earlier 50 basis points.

Last month, RBI Monetary Policy Committee (MPC) member Jayanth R Varma in a telephonic interview with PTI told that the monetary policy committee is prioritising inflation right now, and trying to bring inflation under control and then move from that. He added that the monetary policy takes, you know, five to six quarters to have its impact and cool prices.

RBI began the rate hike cycle in an unscheduled policy meeting in May. The Russia-Ukraine war that commenced in February led the global economy to witness inflationary pressures, soaring crude oil prices, energy crises, supply-chain disruption, and steep correction in reserves among others. From May to date, RBI has made four consecutive rate hikes, while it raised the policy repo rate by 50 basis points during three policies in a row. Now, the repo rate stands at 5.9%. RBI's monetary policy tightening has been to tackle inflationary pressure.

In October, India's consumer price index (CPI) eased sharply to 6.77% from the five-month high of 7.41% that was recorded in the previous month, aided by a slowdown in the rise of food prices and a strong base effect. However, inflation continues to stay above RBI's upper tolerance limit of 6% for the tenth consecutive month now.

In its research note last month, ICICI Securities said, "we continue to expect India’s policy rate to peak at 6.15% in Dec’22, by which point India’s inflation rate will edge down to 6% YoY, restoring a positive real policy rate."

In its November 2022 bulletin, RBI expects India's economy to record growth between 6.1% and 6.3% for the second quarter of the financial year. The central bank also said that if these growth rates are realised then the country is on course for a growth rate of about 7% in 2022-23.

In the October 2022 policy, the central bank factored inflation at 6.7% for the entire fiscal FY23 which is above its upper tolerance limit. The central bank predicts inflation at 7.1% in Q2, however, the figure is expected to slow down from Q3 at 6.5% and further to 5.8% in Q4. For the first quarter of FY24, RBI predicts inflation at 5%.

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