RBI HOLDS REPO RATE; INDUSTRY, TRADE WELCOME DECISION

Keeping the policy rate unchanged is important for industry, as it will further boost growth.

- NIVEDITA MUKHERJEE

The Reserve Bank of India’s decision to keep the repo rate unchanged at 6.5 per cent on August 10, 2023, marking the third consecutive pause on policy rates by the Central Bank, has been welcomed as a pragmatic approach by India Inc., businesses, and policy experts who view it as a further step towards building up on the growth momentum, providing impetus to industry, and staying committed to bringing inflation within the target band. While being largely viewed as an expected line of action, the retention of the policy repo rate to 6.5 per cent importantly signals a focus on ensuring sustainable growth of 6.5 per cent or more for the economy while navigating challenges of inflation related more to weather conditions, headwinds from weak global demand, volatility in global financial markets, geopolitical tensions, and geo-economic fragmentation, which pose risks to the growth outlook.

For exporters, the stable monetary policy followed by the RBI comes at a crucial time when trade and businesses are exploring new markets and need stability in finance costs amidst the daunting challenges faced by the global economy and its impact on India, agrees Arun Kumar Garodia, Chairman of the Engineering Export Promotion Council. The slowdown in the world economy and tepid demand in major advanced markets have significantly impacted the engineering exports sector, which has reflected in a sharp decline in shipments. "Engineering exports from India conceded a year-onyear decline for the seventh month in a row in June this year, starting in December 2022," says Garodia.