New Delhi: The 50 basis points (bps) hike in the repo rate by the Reserve Bank of India (RBI) was widely anticipated, said industry body FICCI president Sanjiv Mehta while commenting on the monetary policy announcement of India’s central bank.

The RBI Governor has delivered a balanced guidance based on the incoming data clearly indicating the downside risks and the possible upsides that remain on fore. Inflation of course will take some time to settle, and the indicative trajectory highlighted by the central bank sees inflation to be about 5.0 per cent in Q1 of 2023-24. Businesses will have to be prepared to tackle a continued stress in the commodity prices over the near to medium term, said Mehta in a statement.

“Moreover, the Governor has correctly pointed out the synchronous tightening of monetary policy as the third shock to the global economy after COVID-19 and conflict in Europe. What we are witnessing is an unprecedented level of hikes and speed of monetary tightening taking place globally, which is bound to have implications on growth,” he said.

“India’s GDP growth estimate for 2022-23 has been revised down to 7.0 per cent. While the headwinds from the external sector continue unabated, we should be able to hold our ground given our comfortable position on forex and debt levels.”

“Also, the beginning of the festive season in India will lend some impetus to demand but maintaining the momentum as we enter the next year could be a challenge and this factor will have to be built into the budget preparation exercise for next year,” added Mehta.

“We look forward to further details on the expected loss-based approach for loan loss provisioning by banks and the framework for securitization of stressed assets,” said Mehta. /BI/