Chambers' kudos for Mint Road pronouncements

Leading industry associations have lauded Reserve Bank of India (RBI) governor Yaga Venugopal Reddy for leaving the bank rate unchanged and reiterating commitment towards maintaining a stable interest rate.

The pick-up in non-food credit is an indicator of fresh investment that is coming our way and stable interest rate will help push the credit off take further, the chambers said.

It is the increase in the repo rate by 25 basis points which has signalled a possible tightening of the monetary condition and is in keeping with its careful stance on keeping inflationary expectations reined in, the chambers said.

The Confederation of Indian Industry (CII) said that bringing down the GDP growth forecasts to 6-6.5 per cent is in line with the chambers revised estimates of September this year.

The CII president Sunil Munjal called for further deepening of reforms that will enable the economy to grow consistently at 8 per cent.

The adherence to the Fiscal Responsibility and Budget Management norms is an essential condition in this regard. A further tightening of revenue deficit both at the Centre and states would provide greater space for accelerated private sector investment, Munjal said.

Y K Modi, president of FICCI welcomed RBI's continued stance on pushing credit for agriculture and Small Scale industry, which are the backbone of the economy.

Measures like enhancement of Composite loan limit for SSI entrepreneurs from Rs 50 lakh to Rs 1 crore, urging banks to keep momentum of lending to agriculture, establishment of RIDF X etc are in line with the intention stated in the Union Budget.

FICCI had been long proposing the need to place necessary emphasis on these critical sectors of the economy to push up growth and employment. Meanwhile, increase in NRE deposits by 50 basis points will help attract more investments and is a welcome move, FICCI said.

Modi also appreciated RBI's move to place a lot of committee reports on critical issues like Ownership and governance of Private sector Banks, NDS, Guidelines on BASEL II, Payment and Settlement System, Debt restructuring Mechanism for Medium enterprises etc. in public domain for further discussion with the relevant stakeholders.

ASSOCHAM president, Mahendra K. Sanghi said that the policy pronouncements are on expected lines. He expressed happiness that the GDP growth target as projected by RBI will be exceeded despite adverse developments like late arrival of monsoon and drought conditions in some part of the country.

Sanghi however added that the industry was expecting an announcement for marginal decline in the interest rate which has not happened. On increased repo rate by 25 per cent, Sanghi said that it will propel the scheduled commercial banks investments towards non-government securities which in turn will benefit the Indian industry.

PHDCCI president, Ravi Wig said that the overall stance of monetary policy to have appropriate liquidity to meet credit growth and support investment and export demand in the economy while placing equal emphasis on price stability is indeed a step in the right direction.

However, Wig has reiterated that RBI needs to continue to pursue its objective of reducing CRR to its statutory minimum of 3% from the present limit of 5 per cent.

This is required to increase the liquidity in the system as credit needs especially in the manufacturing sector will witness higher growth than in the past.

The increase in the fixed repo rate by 25 basis points from 4.50 hopefully will not have any negative impact on the lending rate structure, Wig said.