Industry calls for rate cut, focus on growth

Ahead of the first mid-quarter review of monetary policy by the Reserve Bank of India (RBI) on Monday, the industry today asked RBI to go in for a bold move, cut interest rates and focus on growth. While the Assocham demanded 50-100-basis point reduction in short-term lending rates and the cash reserve ratio, the Confederation of Indian Industry asked the central bank to focus on growth. CII had earlier called for a CRR and repo rate cut of 100 bps.Assocham President Rajkumar Dhoot said several interest-sensitive segments like banking, automobiles and housing were in the grip of slowdown.

Thus, RBI must use this opportunity for bold announcements, he said in a statement. “After the release of the inflation data for May, the industry feels that there is enough room for the RBI to cut interest rates,” CII director general Chandrajit Banerjee said.

 

“An analysis of the inflation data reveals it is being driven up almost entirely by food articles and fuel prices, even as core inflation remains below five per cent,” CII said in a statement. Headline inflation moved up to 7.55 per cent in May, as compared to 7.23 per cent in April. In its annual credit policy for 2012-13 on April 17, RBI had slashed the repo rate by 50 basis points to eight per cent.

The industry has been asking for monetary stimulus from RBI on the plea that demand slowdown, rising input costs and high interest rates have affected businesses. The country’s industrial production growth rate slowed sharply to 0.1 per cent in April, as compared to 5.3 per cent in the same period last year, mainly due to contraction in capital goods and dip in manufacturing output.