Millennium Post

As expected, India Inc cribs about interest not being cut

Disappointed over RBI's decision to keep interest rates unchanged, India Inc on Tuesday said the central bank could have leveraged abating inflation risks to effect a rate cut, as high cost of credit has been dissuading industry from undertaking capacity expansion.

‘At a time when industrial growth continues to be sluggish, CPI-based inflation is moderating and above all, inflation risks are gradually abating due to improvement in monsoon conditions, the RBI could have taken this opportunity to effect a cut in interest rates,’ said CII Director General Chandrajit Banerjee.

‘The high cost of capital has been dissuading industry from undertaking capacity expansion and is causing financial stress among firms where demand is credit driven,’ he added.

‘The retention of benchmark lending rate, repo, at eight per cent, is a clear indication of RBI's pronounced bias in favour of further cutting inflation, which may not help revive growth to the extent of its potential of six per cent in the current fiscal,’ Assocham President Rana Kapoor said.

However, industry bodies — FICCI, CII and PHD — have welcomed the RBI's decision to lower banks' minimum bond holding requirements, known as SLR, by 50 basis points, saying the move will
help augment liquidity in the system and channelise fund flow to productive sectors of the economy, even as Assocham termed it a ‘symbolic move’.

‘Steps taken by the government to manage food inflation should be followed up with close coordination with the states to ensure that the mitigating impact of the same are seen at the earliest,’ Ficci President Sidharth Birla said.

‘We believe reduction in the repo rate would be critical to revive the industry sector growth and to refuel growth trajectory in the coming times,’ PHD Chamber President Sharad Jaipuria said.

‘The high rate of interest, without the adequate interest subsidy would be a dampener for the optimism which is being witnessed in some of the external markets, particularly the US,’ exporters' body EEPC India Chairman Anupam Shah said.
Next Story
Share it