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RBI must cut interest rate by at least 25 basis points: Assocham

It made a strong case citing five-year low inflation and deceleration in the factory output

IANS  |  New Delhi 

RBI must cut interest rate by at least 25 basis points: Assocham

Ahead of the Reserve Bank of India's (RBI) forthcoming review next week, industry chamber (Associated Chambers of Commerce and Industry of India) has on Sunday urged the apex bank to cut interest rates in view of latest data that shows at a five-year low and deceleration in the factory output.

"Citing at a five-year low and deceleration in the factory output, the has written to Governor Urjit Patel, making out a strong case for at least 25 basis point cut in the policy when the Committee (MPC) meets on August 2," an said in New Delhi.

"After a long duration of consistency in the repo rate, believes that the could reduce the policy rate," chamber Secretary General D S Rawat said in his letter to the Governor.

Retail in India during June dropped to a record low of 1.54 per cent, while industrial production data showed that the growth in factory production fell to 1.7 per cent in May, from 8 per cent in the same month a year ago.

"The (WPI) also eased to 0.9 per cent from 2.17 per cent. The case for rate-cut is additionally strengthened by easing of food to (minus)-2.12 per cent from 0.31 per cent. Good monsoon forecasts for the current financial year have additionally created a stance for further reduction in the food inflation," said.

At its second bi-monthly review of the fiscal on June 7, the maintained status quo on its repo, or short-term rate for lending to commercial banks, at 6.25 per cent.

In doing so, the policy statement said the six-member was guided by the risks to It was the fourth policy review in succession that the had kept the repo rate unchanged.

Since the started setting rates in October last year, this was the first time it did not take a unanimous decision, with five members voting in favour of holding the rate and one opposing.

Three of the six members of the are government nominees, while the others are from the