The Reserve Bank of India (RBI) raised interest rates by a higher-than-expected 50 basis points on Tuesday, stepping up its fight against persistently high inflation despite slowing growth in Asia's third-largest economy.
The Reserve Bank of India increased the repo rate, at which it lends to banks, to 8%, exceeding market expectations that it would raise rates by 25 basis points.
Following are views of industry officials:
Arvind Parekh, Director, Jindal Stainless:
"This was definitely higher than expectations but RBI is trying to stay ahead of the inflation curve even if it is at the cost of growth. Demand has most certainly taken a hit and even production costs will go up all around as borrowing costs will increase.
We are strongly hoping that this will be the last increase the RBI will do as there has been some easing of inflation in the past month"
MS Unnikrishnan, managing director, Thermax:
"We are already seeing a slowdown and moderation in the order intake. Investor confidence is going to further reduce with increased repo and reverse repo rates. The government is aware that this is going to reduce investments and GDP growth."
Vipul Jain, managing director, Kale Consultants:
"I think the domestic business--the Indian market--is turning into a significant market for the IT industry. If there is less capital investment, if the cost of borrowing is higher, then it will slow down the domestic industry, which could indirectly impact IT companies."
Pradeep Jain, Chairman, Parsvnath Developers:
"This would impact the input cost of the real estate sector. With the result of the increase in cost of funds, I don't foresee any large concern for the real estate sector, except the burden on individuals on further increase in cost of funds and value of properties. The developer has no option but to pass it on to the buyer."
Nikhil Nanda, Joint Managing Director, Escorts:
"It is unfortunate that interest costs are going up. It will lead to increase in various costs in terms of input costs, in terms of liquidity flow and more importantly, from the customers point of view. So my concern is more from the consumption side and this is across various segments be it cars, motorcycles and tractors. Since the interest rates have gone up by 50 basis points, any manufacturer will add the costs over a period of time and pass them to the customer."
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