Ficci pitches for 1% cut in rates by RBI to boost growth

Industry body Ficci today expressed concern over reluctance of banks to reduce interest rates and said the Reserve Bank should cut the key rates at least by one% to boost manufacturing in the country.

"This (the rate cut by the RBI) has not yet translated into a reduction in lending rates by banks...There is a need for reduction in interest rates by about 100 basis points over the next 6 months," Ficci President Naina Lal Kidwai told PTI.

Kidwai said the bank's lending rate has come down only to 9.7-10.25% at present from 10-10.75% in April last year, which is not tandem with the rate cuts announced by the RBI.

During 2012-13, the Reserve Bank reduced key policy rate by 1% to 7.50% in three tranches to prop up sagging economic growth.

RBI is scheduled to announce annual monetary policy for 2013-14 on May 3.

RBI, Kidwai further said, should take advantage of the falling value of gold and oil prices in the international market to promote low interest rate regime.

She said that the present difficult economic situation demands focus on enabling the economy back to a high growth trajectory as there has been mixed signs of recovery.

Prime Minister's economic advisory panel has said that improvement in performance of agriculture and manufacturing sectors is expected to push the economic growth rate to 6.4% in 2013-14 from 5% in the previous fiscal.

"We  need to focus on achieving a growth rate of 6.1-6.7%...Bold reform measures by the government are absolutely imperative to revive the animal spirits", she added.

Referring to the recent decisions of the Cabinet Committee on Investment (CCI), Kidwai said: "It is heartening to note that the CCI has begun to unscramble stuck investments in the power sector and  the oil and gas sector which will bring in an additional investment of $2.5 billion over the next 3-5 years in exploration."