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With another RBI rate hike looming at the next Monetary Policy Committee (MPC) meeting, it is expected to dampen consumption in the medium term, lower GDP growth prospects and impact on mortgages as interest rates rise due to the Raising funding back to pre-Covid levels will cost.
On the other hand, other experts expressed optimism about the resilience of the Indian economy in the face of the unstable global economy and concerns about the slowdown,
Many pundits have offered their opinions on the rate hike and attempted to determine the implications of the RBI’s move.
Vijay Kalantri, Chairman of the MVIRDC World Trade Center, Mumbai, said; “We expect liquidity to tighten going forward as the RBI continues to intervene in the FX market to support the rupee, which may continue to face depreciation pressures as the US-India interest rate differential, which peaked in March 2022 was up to 4%, has dropped to 2.9% today (Friday).”
The MVIRDC World Trade Center is an international trade promotion organization.
He went on to say that the increase in India’s interest rate will slow consumption in the medium term and lower expectations for FY23 GDP growth to below 7%. However, Kalantri said he expects bank credit growth to remain strong, driven by production-linked incentive (PLI) schemes and an increase in industrial capacity utilization.
Santosh Meena, Head of Research, Swastika Investmartsaid: “The main highlights were the resilience of the Indian economy in the face of the turbulent global environment and concerns arising from the global growth slowdown and the hawkish stance of various central banks,”
He went on to say that inflation is showing signs of declining, however the downgrade in GDP growth forecasts is one of the disappointments in the overall comment.
show optimism Parth Nyati, Founder, Tradingosaid: “It is important to note that the governor’s view of the Indian economy is constructive despite the global headwinds. However, to ensure the current recovery lasts, the government needs to increase spending. The main concerns mentioned in the comment were global & geopolitical uncertainties…”
brokerage and research firms, Economist Garima Kapoor from Elara Capital said: “In the future, domestic monetary policy could continue to be driven by the global cycle of monetary tightening, with the aggressive stance of the Federal Reserve limiting our degrees of freedom.”
Explanation of how this would affect the real estate sector, Shishir Baijal, Chairman and Managing Director, Knight Frank Indiasaid: “Tightened liquidity conditions together with the increase in the repo rate would lead to a significant increase in the cost of financing, which would also affect interest rates on home loans. Based on current trends, we estimate that about 50% of that will be passed on to home borrowers. A rise in home loan rates will continue to hurt affordability in the markets.”
He went on to say that Knight Frank’s affordability index would fall another 2%, which could shave a few months to a year off the home-buying decision.
Amarendra Sahu, Founder and CEO, NestAway Technologies, said: “With this rate hike, interest rates have risen 190 basis points cumulatively in this calendar year alone.
He claimed that the upward trend in rates is likely to last longer than expected as the workforce returns to the workforce and economic activity picks up.
KV Srinivasan, Managing Director and CEO, Profectus Capitalsaid: “While most countries are also facing slowing growth rates, India remains an exception with projected GDP growth of 7%. While investment costs are likely to increase, I do not believe this will hamper the investment cycle as Indian industry MSMEs (micro, small and medium-sized enterprises) in particular have the capacity to absorb this.”
(With inputs from ANI)
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