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With the inflation numbers for the December 2013 turning out to be favourable, the interest rate hike should take a halt at this level to give some fillip to the investment, said Naina Lal Kidwai, Country Head - HSBC India here on Wednesday.
Industry is hopeful of a halt in the rate hike regime by the apex bank, Reserve Bank of India (RBI) in the wake of a decline in the interest rates and slowing pace of growth.
“Inflation, especially the food inflation has shown signs of cooling down. There should be a break on the interest rate hike now. Because the growth is not returning and there requires a fillip to the investment at this point,” said Kidwai on the sidelines of the National Executive Committee Meeting of the Federation of Indian Chambers of Commerce and Industry (FICCI).
However she also maintained that there were major challenges of rising non-performing assets (NPAs) of the banks in the country.
Considering the challenges, Kidwai expected that RBI may not bring down the key rates, but would at least halt the increase in its upcoming monetary policy review slated for the later this month.
Wholesale inflation has fallen to a 5-month low of 6.16 % in December 2013. Inflation in food articles was 13.68% in December as against 19.93% in the preceding month.
On the other hand, the industrial output has contracted by 2.1% in November 2013, one of the worst in six months.
The RBI had maintained a status quo in the key policy rates last month. In the wake of high inflation rates, the repo rate had been increased twice between September and November last year from 7.25% in September to 7.75% in November, while the Cash Reserve Ratio (CRR) remains at 4%.
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