Industry appeals for slashing interest rates grow stronger

Decline in inflation will hopefully create some space for monetary policy easing by the RBI: Ficci

India Inc's appeal for easing of Reserve Bank's key interest rates grew stronger as inflation declined to 9-month low of 4.68% in February.

"The moderation in inflation should induce the RBI to make a shift towards a more accommodative monetary policy stance to revive investment and propel demand especially as investment demand is declining and consumer durables are in the red," CII Director General Chandrajit Banerjee said.

For the first time in nine months, inflation based on Wholesale Price Index, slipped below the psychological mark of 5% in February on easing prices of onion and potato.

Industry officials believe that this has created headroom for RBI to cut interest rates in the monetary policy review on April 1 so as to boost the sagging economic growth.

RBI has maintained a hawkish interest rate regime to tame inflation. Industry, on the other hand, has been demanding a cut in interest rates to boost economic growth, which has slowed to a decade-low level.

"The decline in inflation will hopefully create some space for monetary policy easing by the RBI. This is imperative as the sentiment of caution continues to weigh heavy on the minds of investors," Ficci President Sidharth Birla said.

Food inflation dropped to 8.12% in February, compared to 8.8% in January, as the rate of price rise slowed in almost all items, except fruits and milk.

"A cut in repo rate at this juncture would pave the way for economic recovery to become more visible and sustainable," President of PHD Chamber of Commerce Sharad Jaipuria said.

Inflation, which is on decline since December, was 5.05% in January. Prior to February, the lowest WPI was recorded in May 2013 at 4.58%. In June, it had inched up again to 5.16%.

Assocham President Rana Kapoor said: "Drop in inflation sets the stage for the Reserve Bank to go in for cut in the policy interest rates in wake of the sharp deceleration in industrial demand".