'It's time for India to pause rate hikes to salvage manufacturing'

It is time India's interest rate cycle decoupled from that in the rest of the world as the high interest rate is constraining the manufacturing sector, said Sanjiv Bajaj, president of industry body Confederation of Indian Industry (CII) and CMD of Bajaj Finserv.

- Gireesh Chandra Prasad

Bajaj said in an interview that the economic recovery has been uneven with the rural sector lagging behind in consumption. Broad-basing exports and paucing on rate hikes by the central bank to support the manufacturing sector, will give the economy a steady growth in coming years, Bajaj said. Edited excerpts:

Although the economy is forecast to grow at 7% this fiscal, official data show that the gross value added in the manufacturing sector has been declining in absolute terms in the first three quarters of this financial year. What is going on?

There are two reasons for this. As a result of the pandemic and thereafter, inflation and the interest rate hikes which were needed (to tame inflation), the domestic growth has been unequal. The spending of the middle class and above which ended up saving money, has increased.  Same (true) for urban India.  But the lower income classes got hit the hardest due to the pandemic and then because of the effect of inflation. The  rural India got hit harder than the urban India. And this has caused our domestic growth to be unequal.

The second reason is about export-led growth. Now export accounts for a significant part of our economy,  and we know that many of the global uncertainties still remain.