“The increase in the repo rate by 25 basis points has come as a surprise to us. The RBI has admitted that industrial activity continues to remain sluggish and even consumption demand is now starting to weaken in the economy. In such a scenario, a positive signal by way of a cut in the repo rate, which FICCI has been advocating for long, would have helped perk up sentiments.
“There has been an upward pressure on inflation, but this is largely due to the spikes seen in prices of food articles. Dealing with such inflation calls for structural changes in the supply chain of food products as well as improving productivity through higher agri-investments. Further, with Rupee on the mend, we could see the pressure from imported inflation coming down in the days ahead. Given this situation and the concerns over inflation, RBI could have maintained the repo rate at the current level even if the case for a downward revision was not acceptable as per its own analysis."
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