ECONOMY

HDFC’s Deepak Parekh Sees Modest Repo Rate Hikes By RBI

HDFC Ltd. Chairman Deepak Parekh doesn’t expect the Reserve Bank of India to be “aggressive” in raising interest rates but sees “modest” hikes.

“I don’t expect aggressive [rate] hikes in India because we have to err on the side of growth rather than price stability,” Parekh told BQ Prime’s Menaka Doshi in an interview. He had expected the central bank to announce the hikes in the last monetary policy.

On May 4, India’s Monetary Policy Committee in an out-of-turn meet raised the benchmark repo rate by 40 basis points. The MPC also hiked the cash reserve ratio by 50 basis points. The emergency measures, it said, were taken in response to the rising inflation.

“Because of surplus commodities, price will be stabilised. I am surprised why has some agricultural produce [price] gone up significantly when there is ample supply. Most factories are working at 70-80% capacity, if the demand increases they can ramp it up to 100%. So, there is no shortage of supply,” Parekh said.

“The shortage [that] is coming in India today is import of semiconductors. The shortage of raw material is hampering our growth, which may cause a little inflation, because commodity prices have gone up, crude has gone up, and we are dependent on that.”

Still, Parekh said that the country would not witness double-digit inflation. “India’s inflation is not as high as Europe and [the] U.S. We still have some hope.” Inflation won’t hamper “growth significantly”.

“So, I don’t think the response of the central bank will be that aggressive to start with… there will be modest increases.”

Parekh, who joined HDFC more than four decades ago, expects tax breaks to keep demand buoyant despite interest rate hikes. “There are certain tax concessions also for a salaried person. The interest you pay is allowed as a deduction.”

Also Read: Deepak Parekh Has A Plan B For HDFC Merger If Hurdles Emerge



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