With economic growth slowing to 7 per cent in the April-June quarter, India Inc said on Monday the subdued performance indicates that the cost of capital needs to come down, demanding a rate cut by RBI.
"Both consumption and investment levers need a thrust. While the government stands committed to further the reforms agenda, we need to equally create conditions that provide capital at an affordable cost to our entrepreneurs.
"We hope that RBI will usher in a deeper cut in policy rates in its September review of the monetary policy," Ficci President Jyotsna Suri stated.
The GDP growth slowed to 7 per cent in the June quarter, from 7.5 per cent in the previous quarter, amid deceleration in farm, services and manufacturing sectors.
"With prices seemingly under control, we urge the monetary authority to focus on ensuring that cost of finance to industry becomes competitive, more so especially in the context of subdued growth as indicated by the recent IIP numbers," Assocham President Rana Kapoor said.
"Easing of monetary conditions would lead to a lower lending rate framework that would aid both consumption and investment demand. Therefore, RBI must give due consideration to reviving industrial growth in the country," he added.
The industry body also expressed concern over anticipated slowdown in the pace of reforms.
"The government needs to keep on pushing at more ground-level reforms and improve implementation so as to realise the economy's true potential.
"The need is for creating an investment- and industry-friendly environment that is largely focused on growth, job creation, poverty alleviation and passing the benefits of the economic growth to the lowest sections of the economy," said Kapoor.
"While the process of recovery might have started, we need to continue with the reforms process to ensure that we are firmly rooted on a sustainable growth path."
The Gross Value Added (GVA), a new concept introduced by CSO to measure the economic activity, also slipped during the first quarter to 7.1 per cent, from 7.4 per cent a year ago.
However, CII Director General Chandrajit Banerjee termed the 7 per cent growth as "impressive", as it is higher than 6.7 per cent experienced in the same period last year, noting that it bolsters the perception that the economy is showing signs of a turnaround and is on the road to recovery.
Going forward, CII expects some pick-up in investments as the impact of measures taken by the government towards de-clogging the project pipeline would be visible in months ahead.
Banerjee stated that the government should continue to push critical reforms and take pro-active steps to effect simplification of procedures, ensure transparent and flexible tax system and work towards a political consensus for ensuring early passage of GST, labour laws etc to rev up business confidence and help ramp up demand in the economy.
