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.“Steps taken by the Govt 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.