India Inc Believes RBI’s Upcoming Monetary Policy to Increase the Interest Rates

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India Inc is of the view that Reserve Bank of India will increase key interest rates in its upcoming policy review.

Over 40 per cent of Indian corporates surveyed by CII expect the central bank will go in for another interest rate hike in the current fiscal, industry chamber CII said, citing its survey.

“In the current survey, about 42 per cent of the respondents felt that the RBI will engage in further interest rates hikes in 2018-19 as compared to the previous survey where a majority of the respondents anticipated a cut or no change in policy rates in 2018-19,” CII said.

The RBI’s Monetary Policy Committee is slated to announce its next policy review on October 5.

Over its two previous bi-monthly monetary policy reviews, the RBI has hiked its repo, or short-term lending rate for commercial banks, by 50 basis points to bring it up to 6.5 per cent.

“In an indication of rising confidence about the future growth trajectory and business prospects, companies are more than just optimistic about the return of good times during the second quarter of FY19,” the statement said.

“This finds a reflection in the CII Business Confidence Index (BCI) which has touched the series high of 64.9 as against 60.1 in the last quarter.”

CII Director General Chandrajit Banerjee said there is a definite improvement in the tempo of business activity, powered by expectations of improved consumption and investment growth.

“It underscores the hope that the facilitative government policies would result in a faster rise in output and new orders which would spawn a host of business opportunities for firms and business units both in India and abroad,” Banerjee said.

According to the survey, amidst indications that the economy is on the cusp of a turnaround, 64 per cent of respondents felt that GDP growth in the current fiscal will be in the range of 6.5-7.5 per cent.

Of these, 36 per cent expect GDP growth to lie in the range of 7-7.5 percent, while 28 per cent estimated GDP growth will be in the 6.5-7 per cent range.

Around 65 per cent of the companies surveyed anticipate an improvement in private sector investment activity in the remaining quarters of 2018-19, CII added.

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