India stands out as fastest-growing economy, but RBI should halt any more rate hikes: ASSOCHAM

New Delhi [India], April 4 : With the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) set to review the benchmark policy rates, apex industry chamber ASSOCHAM has urged the central bank's MPC for a halt to more hikes with the lending rates amid uncertainties in the global business environment.

Addressing his maiden press conference after taking over as the president, ASSOCHAM's Ajay Singh elaborated on several key issues confronting the Indian industry, including the overall economic outlook, inflationary pressures and several unfolding opportunities for the young entrepreneurs as the country leverages the technology-led economic expansion with large job potential.

He said, "Though India remains the fastest-growing nation amongst the major economies, growth is uneven even as the global headwinds from volatile energy prices, geo-political developments and threat of recession in major economies need to be watched with an abundant caution."

It is in this context, the president said the ASSOCHAM is calling for a halt to any further rise in the interest rates, "unless there is a radical change in circumstances".

"There are suggestions in some quarters about another 25 bps (basis points) increase in the repo rate by the RBI Monetary Policy Committee, we feel the economy has reached a saturation point beyond which it may be difficult to absorb any more rate hikes. Rate sensitive sectors like real estate including residential complexes, passenger cars, commercial vehicles may see negative impact of the rate hike, said the new ASSOCHAM President.

ASSOCHAM Secretary General Deepak Sood said, "So far, the RBI has responded well to the external rate hike without pressing any pc button. However, about a 250 basis points increase in the policy rate since May last year, has started exerting pressure on the consumers as well as corporations."

Sood said, "India is on the cusp of an opportunity to become a manufacturing hub for the global giants." "Those wanting to diversify into India or expand their operations here should be provided all the policy support in terms of their vendor development programme, meeting their raw material requirements, etc," he added.

"The country stands out as a performer even in the midst of a tough global economic and geo-political environment," Sood said, adding, "Having grown by seven per cent, the Indian economy is projected to register 6.5 per cent expansion in the FY24."

Manufacturing of several hi-tech products, for example in electronics would require the entire value chain which may not be available completely here at this point of time. The value addition right up to the final products should be encouraged. With this approach, the Make in India would get a big lift, and the objective of a USD 5-trillion economy by 2025 can be realised, according to Sood.

India has made great strides in the Digital India drive and along with the financial inclusion of 60 crore new bank accounts of the economically weaker sections of society, all the building blocks are there for reaching further penetration, according to ASSOCHAM.

In 2022, as many as 8,840 crore digital transactions took place in the country with Unified Payments Interface (UPI) accounting for 52 per cent. Total value of digital transactions was Rs 126 lakh crore.

Talking about the micro, small and medium enterprises (MSMEs), Ajay Singh further said most of them are in the services sector, notably trade , street vendors, restaurant owners, small transport operators and job contractors or medium-sized compes.

While the fintechs are fast reaching out to them, Singh said they need to be supported in terms of accessing their high-end tech platforms like artificial intelligence (AI) both for working capital as also marketing support. "The MSMEs can thus access and leverage AI-based platforms for promoting their businesses. This would also lead to further formalisation of the economy," he added.

Like in the case of MSMEs, technologies like AI should be leveraged for food management, both in production and supply. "Technology platforms should link farmers, fast-moving consumer goods (FMCG) compes, small distribution channels, state governments and the central ministries of food and consumer affairs, as well as earth science, agriculture, farmers' welfare and rural development," Ajay Singh said.