We are in the era of higher interest rates: Sanjiv Bajaj

India Inc. expects 7.4-8.2% GDP growth in FY23

Newly-appointed president of the Confederation of Indian Industry (CII) Sanjiv Bajaj on Monday said interest rates would likely continue to move up, which will, to some extent, help in bringing down inflation.

Mr. Bajaj, chairman and managing director of Bajaj Finserv Ltd., added that the industry association expected GDP growth in the range of 7.4-8.2% in FY23, with the outlook “critically hinging” on the trajectory of global crude oil prices.

He said global headwinds and inflation would have to be countered with robust policy reforms, both domestic and external sector reforms, to unlock growth potential in the economy. “Tailwinds that are supportive of growth in the short-term include government capex, private sector investment which is showing an uptick aided by strong demand in some sectors and the PLI push in others, good agriculture season on the back of the expectations of a good monsoon and positive export momentum,” he said during his first media interaction after taking over as the CII president.

Replying to a query on inflation, he said the rise in inflation had two aspects - demand, and the supply side. On the demand side, RBI has started the cycle of taking interest rates up and “we should expect interest rates to continue moving up in the coming year. We would expect from RBI a clear direction to how they will address interest rates and hopefully, in the next monetary policy review, we should be able to hear from them some thing to that extent,” he said.

He added, “On the supply side, a lot of it driven by oil.. a lot of supply chain disruptions that continue to happen... all this put together... I do believe we are in the era of higher interest rates. This will help us in bringing down inflation, at least part of that going forward.”

Mr. Bajaj said various factors, combined with hopes of a strong monsoon, “should put us in a better place by the second half of the year for us to decide where interest rate and inflation would move.”

An immediate measure to moderate inflation could be to moderate taxes on fuel products, which constitute a large share of the retail pump prices of petrol and diesel. “CII would encourage Centre and State governments to collaborate in reducing these duties,” he added.