Unhappy with Reserve Bank’s status quo policy stance, India Inc said the central bank could have been more accommodating by reducing interest rate to boost subdued economic growth.
The rate cut, the industry chambers argued, could have given a positive signal to the manufacturing sector which is undergoing difficult times.
“Although there has been some improvement in core sector activity, manufacturing has been subdued due to weak demand, therefore curbing major improvement in capacity utilisations.
“We continue to hope that RBI may send positive signals even sooner than the next policy review cycle,” FICCI President Sidharth Birla said in a statement.
There were hopes that RBI could have found a merit in an accomodative stance on interest rate cycle on persistent weak demand and sustained moderation in inflation, FICCI said.
Reserve Bank today kept the repo rate unchanged at 8 per cent and cash reserve ratio (CRR) at 4 per cent, citing reason that a change in the monetary policy stance at the current juncture is “premature”.
Reading out the policy in a conference, RBI Governor Raghuram Rajan said, “There is still some uncertainty about the evolution of base effects in inflation, the strength of the on-going disinflationary impulses, the pace of change of the public’s inflationary expectations, as well as the success of the government’s efforts to hit deficit targets”.
RBI has obviously overlooked strong demand from the industry for a cut in interest rates. The industry’s demand for lower interest rates was fully justified, Assocham said.
“I am confident that this coordination between monetary and fiscal policy coupled with pragmatic economic governance will facilitate a strong revival in investment climate and growth in FY16. I see space for monetary accommodation to the tune of close to 100 bps cut over the course of next 12 months in FY2015-16,”said Assocham President Rana Kapoor.
CII said when economic recovery is still fragile and industry is growing at a faltering pace, bold decision of RBI to ease interest rates would have particularly benefited the credit starved SME and improved the poor credit offtake by industry.