Although the equity markets scaled new highs for 2013 on in-line with expectation Reserve Bank of India’s second quarter monetary policy review 2013-14, India Inc expects this move to be a ‘double-edged sword’, as it would result in an increase of interest rates for both companies and customers, already hurt by an economic slowdown. As per India Inc, while domestic loans will become more expensive for companies, customers too will have to shell out more for equated monthly installments (EMIs) on housing and auto loans, if banks decide to pass the rate hike which they probably will.
Additionally, Confederation of Indian Industry (CII) too expressed disappointment with RBI’s decision of hiking repo rate by 25 basis points, especially at a time when the investment climate continues to be weak and growth outlook remains muted as a high interest rate regime deters consumption and investment demand.
As per CII, India’s apex bank could have refrained from affecting the hike as the industry was already reeling under pressures of high cost of capital and low availability in a tight liquidity situation.Further, the move also came as blow to FICCI, which was expecting RBI to steer focus towards supporting growth, which is essential for employment generation in the economy.
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