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Industry body Assocham President Sumant Sinha has said the Reserve Bank of India’s (RBI) decision to raise the benchmark lending rate by 50 basis points to 4.9 per cent will help the Indian economy in the medium term. The central bank has raised the repo rate for the second time in five weeks. Earlier, it had raised the short term lending rate by 40 basis points (bps) on May 4.

Assocham President Sumant Sinha said through a clearly well-coordinated approach between the RBI and Finance Ministry, Indian government and monetary policymakers have managed the challenging global environment with foresight and calmness.  Further, he said that inflation, though a concern, is still within relatively manageable limits, especially when compared to many parts of the world. He mentioned ‘It is understandable that there is concern about the rate hikes resulting in higher EMIs, but, in the longer run, the resulting price stability will play a crucial role in supporting rising demand, which is key.’

Sinha said that RBI will have to continue to work closely with the government and other stakeholders such as India Inc. to ensure the robust pace of the economic recovery coming out of the pandemic's third wave is sustained, in a higher interest rate environment. He pointed out the taming of inflation is critical to sustain the economy's robust growth momentum, especially given the continued global challenges including high energy and food costs. He added all in all, the RBI's move is necessary and well-reasoned, given the current macro-economic currents.