Indian industry has reacted strongly to Reserve Bank of India (RBI) not changing policy rates despite lower industrial production, slow credit growth and dwindling investments.
“It is unfortunate,” said Seshagiri Rao, joint managing director and chief financial officer JSW Steel.
Indian industry has been going through a painful phase of high interest rates, declining demand and insufficient availability of working capital. “The puzzle however remains how the inflation is inching up structurally with virtually no pricing power with the industry. The industry is not able to pass on even the cost due to inflationary impact,” he said. “It clearly establishes that the high cost of goods and services are due to constraints attributable to expensive supply side logistics,” he elaborated.
The profitability of industry is under squeeze and stress and requires to be addressed by encouraging investments in the supply side infrastructure rather than squeezing the investment demand with un-affordable interest rates.
RBI has lowered its gross domestic product (GDP) growth forecast to 5.7 per cent from 6.5 per cent. Given the low level of investment activity in both manufacturing and infrastructure, particularly in Power.
“The monetary policy announced today has been disappointing,” said A Mahendran, managing director, Godrej Consumer Products Ltd (GCPL). “I see the lull in corporate investments persisting for a while. In my view, this is certainly not a very good sign,” he said.
The RBI however brought down the Cash Reserve Ratio (CRR) by 25 basis points leading to Rs 17500 crore to infuse liquidity. “RBI may have to bite the bullet sooner rather than later and take a call to lower interest rates,” said Y M Deosthalee, chairman and managing director, L&T Finance Holdings.
