Corporate captains presage rate rise

MID-TERM REVIEW OF ANNUAL POLICY 2004-05/ DIFFERENT STROKES

India Inc said the Reserve Bank of India (RBI) has clearly pointed towards a firming up of interests rates in the near future. Corporates were also unanimous that the mid-term review of the annual policy was supportive of growing investments in the economy.

Some corporates feel that RBI's measures to control inflation could have an impact on the margins. Habil Khorakiwala, chairman Wockhardt, said, "The central bank has rightly noted that the higher oil prices have not yet been reflected in domestic prices. Industry will not be able to pass on higher energy or interest burden to the consumers. This will mean a squeeze on margins."

In the pharma industry, members of the Indian Pharmaceutical Alliance (IPA) have voluntarily undertaken a price freeze till next March as our contribution to price stability and inflation control, Khorakiwala added.

Seshagiri Rao MVS, director finance, Jindal Iron & Steel Company, said, "The RBI has given a clear indication that interest rates are likely to go up in the near future, particularly in the context of the repo rate hike. However, it will not have an impact on the investment scenario as there is a buoyant demand in the industry currently."

The corporate sector also feels that the government has also emphasized on price stability over growth in its new credit policy, by lowering the growth estimates and upgrading the inflation targets.

Y M Deosthalee, chief financial officer, Larsen & Toubro "The RBI policy is supportive of the revival in the economy, particularly the industrial sector to the extent of holding the benchmark rate unchanged. Encouraging NRE deposits and removal of the 7 and 14 day repo could improve liquidity available to industry. In a realistic assessment of the economy the RBI has revised the GDP growth estimates downward and the inflation rate upward. The challenge of tackling supply induced inflation has also received its due emphasis."