Uday Kotak feels RBI may go for one more interest rate hike to control inflation

A day after the RBI raised the benchmark lending rate by 35 basis points, Kotak Mahindra Bank Managing Director Uday Kotak on Thursday said the central bank may go for one more rate hike to bring inflation below its upper tolerance level of 6 per cent.
     
Yesterday, the RBI indicated that it wants inflation to be within the band first and then move towards the target of 4 per cent, Kotak said at the CII Global Economic Policy Summit 2022.
     
"My sense is that there could be one more rate hike and that may be the time for thinking about a pivot, but we got to watch very closely the data, and maybe around 6.5 per cent as it looks today, subject to what happens to the world, subject to what happens to oil, subject to what happens to many other things," he said.
     
Kotak further said the US Federal Reserve's decision on interest rates this month will be a signal for other central banks.
     
"I think that is going to be a very crucial signal about what is the interest rate trajectory in the largest market and the largest pool of money in the world, which is the US," he said.
     
The Reserve Bank of India (RBI) Wednesday hiked the key repo rate by 35 basis points to 6.25 per cent, the fifth straight increase since May.
    
In all, the RBI has raised the benchmark rate by 2.25 per cent since May this year.
     
On the potential of the Indian economy, Kotak said the country has become the fifth largest in the world at about USD 3.2 trillion and has huge potential.
     
There are opportunities to move up the ladder, to be among the top three in the world, and its realisation would depend on certain metrics, including economic performance in terms of absolute GDP and absolute per capita income instead of the PPP comparison, he said.
     
To develop world-class Indian companies, he stressed the need to build scale in manufacturing based on cutting-edge product innovation and developing IP rights rather than depending on arbitrage alone to secure an advantage.
    
Speaking at the event, Bajaj Finserv Managing Director Sanjiv Bajaj said credit needs to be given to the government for continuous and consistent investment from their side in public infrastructure.
     
While the aspect of developing new manufacturing capacities holds promise, its realisation would depend on the execution of policies, Bajaj noted.
     
He further said four broad areas -- aligning industry and trade policies; building a strong financial sector to support the real economy; augmenting education and healthcare expenditure to build people capacity; and expanding the share of manufacturing by extending the PLI scheme in labour intensive areas -- would accelerate India's journey towards a USD 40 trillion economy.