India Inc Favours Bank Rate Cut : Cii Poll

A reduction in the bank rate in the mid-year review of the monetary policy will further strengthen and sustain the revival in industry, according to the latest CEO snap poll conducted by the Confederation of Indian Industry (CII).

The poll also revealed that industry continues to expect double-digit growth rates in the current fiscal. While 70 per cent of the respondents are looking forward to growth rates between 10-30 per cent, only 9 per cent are expecting growth rates of above 30 per cent. Nearly 42 per cent have predicted that their profits would fall between 10-30 per cent.

The index of industrial production for April-July 2002 has exhibited a growth of 4.7 per cent compared with a growth of 2.3 per cent posted in the same period in the previous fiscal. The capital goods industry is also showing signs of revival and has grown by 5 per cent during April-July 2002. This is a welcome contrast to the decline posted in the previous fiscal.

 

In order to sustain this growth, majority of the CEOs felt that the forthcoming mid-year review of the monetary policy by the RBI should incorporate a 50 basis points reduction in the bank rate.

While 64 per cent felt that the reduction in bank rate would lead to a moderate increase in investments, 17 per cent of the respondents stated that the reduction would significantly boost investments.

While there was little doubt that the weak monsoons would prove to be a drag on the overall growth of the economy, the majority of the respondents felt that the deviation in the GDP growth rate of the current fiscal, owing to deficient rains, would not exceed -1 per cent.

In the backdrop of the RBI's forecast of GDP growth at 6-6.5 per cent prior to the monsoon season, this would imply that the economy would grow at near about 5 per cent in the current fiscal.

According to the data released by the ministry of commerce, exports have registered double-digit growth rates for most of the current fiscal. Coupled with decline in imports, this has translated into an improved trade balance for the economy. However, the CII poll has revealed that this scenario could change in the months to come.

A serious concern exhibited by the respondents was on the increasing prices of crude oil, a consequence of the growing uncertainties in the Gulf region. Nearly 73 per cent felt that if the current trend of high international prices of petroleum continued, there would be a significant impact on the country's trade balance.