Repo rate hike will affect trade, industry and public: Chamber

MADURAI: The Reserve Bank of India (RBI) increasing interest rates on loans to banks (repo rate) to 4.40 % from 4% after two years will greatly increase the interest payable on various loans by banks including business loans, home loans, vehicle loans, gold loans and personal loans, the Tamil Nadu Chamber of Commerce and Industry stated.


“The interest rate hike will have a huge impact on the trade and industrial community and the general public, who have already reeling under price rise,” chamber president

N Jegatheesan

said.

The hike comes at a point when the economy that was devastated by Covid started to recover but was hampered by the Russia-Ukraine war as it has led to shortage in the supply chains of consumer goods and crude oil price internationally. The economy is also gripped by inflation, having a major impact on growth.

“In the last three months, inflation has exceeded the RBI’s target and increased to 6.01% in January, 6.07% in February and 6.95% in March,” Jegatheesan said.

Attributing the rise in price of goods to the gap between demand and production, the chamber stated that serious steps must be taken to substantially increase industrial production to keep inflation under check and ensure uninterrupted supply of goods. The interest rate on loans given by banks to the industry will go up due to the current increase in repo interest rate. It would lead to an increase in the cost of production by which trade and the industrial sector will suffer further.

If there is a decrease in liquidity, the purchase of manufactured goods will decrease and the problems faced by the trade and industry will be further aggravated. “To effectively and to permanently control inflation and leverage economic growth momentum, it is imperative for the Union government to immediately and adequately address several constraints faced by many industrial segments not only in high cost of funds but also in enhanced input and transportation costs and infrastructure inadequacies,” the chamber president added.