Pragmatic approach needed: Manas Datta

The policy does not come as a surprise. The unseasonal rains across the country, leading to crop damage, have evoked inflationary concerns and influenced the regulator's decision. Of course, the status quo on interest rates does not help as liquidity is available but not at a price companies are willing to pay for. Banks have not reduced their base rates in at least the past nine months and these continue to be at 10 to 10.5 per cent. This has held back credit offtake.

While the regulator is following the process of inflation management, a more pragmatic approach is needed to ensure that the entire credit offtake does not come to a standstill. At this rate, India Inc will be compelled to hold back fresh capital expenditure. Companies are already venturing out and borrowing overseas at interest rates below three per cent wherever external commercial borrowing regulations permit. Someone has to take a call on how Indian firms can raise money at a reasonable price. After all, what is the point of having liquidity in the system when it is not available to industry at the right price?

Manas Datta
Chief Financial Officer, Wockhardt