Ahead of the announcement of benchmark lending rates by the Reserve Bank of India (RBI) later this week, new Assocham President Ajay Singh today said the banking regulator needs to take a pause on the interest rate hike as any further rate hike will 'adversely impact' several sectors of the economy. Singh, who took over as the Assocham President last week, also said India continues to be a bright spot in the global economy.

"Interest rates have gone up by 250 basis points (bps) in the last one year. It has kept inflation under control. RBI has done a fabulous job in managing the interest rates. It has accounted for external shocks in the economy. We do feel, however, that at this time, any further hike in interest rate is possibly going to have an adverse impact on certain sectors."

"Our suggestion would be to consider carefully before any further hikes. A 25 basis point hike in the repo rate is being talked about. We feel that time has come for a pause in the rate hike. Various sectors of the economy like the auto sector, housing sector need a signal now," Singh added. The monetary policy committee meeting of the RBI has already commenced and it will announce the policy rates on April 6. It is widely anticipated that he RBI will raise the repo rate – the benchmark lending rate – by 25 basis points.

While suggesting a pause on monetary tightening, Singh maintained that the Indian economy remains a bright spot in the global economy. "India is a bright spot in the global economy. The country has shown to the world that the country is capable of leading a group like G20. While the other G20 countries are facing a slowdown in the growth, and high inflation, India has managed to keep inflation low, and a higher growth among the G20 nations. India continues to spend on infrastructure, and investment is picking up while inflation is easing. In every which way, we are a bright spot," he said.

Reacting to World Bank’s moderation of India’s GDP growth to 6.3% for FY24 from earlier projection of 6.3%, Singh said, "Even with the moderation in the projections, we are one of the fastest growing global economies. A 0.1% or 0.2% moderation does not make a huge difference in the larger scheme of things. Global factors will also play a role in how India does." 

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