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RBI rate hike will dampen demand: Auto industry

By Motortrend India Staff   |   16 June,2011

With the Reserve Bank of India raising key interest rates by 25 basis points, automobile industry captains feel the move will further dampen demand in the auto sector of the country.

“No doubt, it will have a negative impact on the automobile industry. It was expected... Now we would like to see how much banks pass the burden (on to customers),” Mahindra and Mahindra President, Auto and Farm Equipment Sector, Pawan Goenka said. Goenka is also the President of the Society of Indian Automobile Manufacturers.

The Reserve Bank raised key interest rates by 25 basis points on Thursday, the tenth time since March, 2010. The RBI has raised the short-term lending (repo) rate by 25 basis points to 7.50 per cent and the short-term borrowing (reverse repo) rate by a similar margin to 6.5 per cent.

“The market has already slowed down... This latest hike will further dampen the auto sector... It is a matter of concern,” General Motors India Vice-President (Corporate Affairs) A Balendran said. “The sector (automobile) is already reeling under pressure due to high input costs and rising fuel prices and the steady hike in interest rates will affect sales,” he added.

“Going forward, the RBI’s initiative will hurt the auto industry by hitting sales. The industry is (already) under pressure and this fresh step will further aggravate the situation,” Fiat India President and Chief Executive Officer Rajeev Kapoor said.

According to the Society of Indian Automobile Manufacturers (SIAM), total sales of vehicles across categories registered a growth of 13.40 per cent to 13,70,786 units in May, as against 12,08,820 units in the same month last year.

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