The Hindu Business Line : CII for cut in interest rates, focus on growth

New Delhi, Oct. 28 A day after the Reserve Bank of India (RBI) announced its Mid Term Review of the Monetary Policy, Confederation of Indian Industries has come out with a set of recommendations, which are aimed at bringing the focus back on growth.

Mr Chandrajit Banerjee, Director General, CII, said, inadequate liquidity, high cost of capital, non- availability of credit, instability in foreign exchange markets and low levels of confidence have tightened the economy.

“We are already seeing the impact of these on the manufacturing sector and soon we are likely to see its impact on other sectors too, particularly in the services sector,” he said in a release.

The CII said the Government and the Reserve Bank of India had brought in a number of measures to infuse greater liquidity into the system, cut repo rate and checked the slipping rupee.

Suggestions

However, to bring the focus back on growth and instil the lost confidence in the economic system, CII has come out with a set of suggestions, in the broad areas of liquidity and interest rates; foreign exchange management; credit flow and impetus to growth; and communication aimed at building confidence, the release said.

In the area of domestic liquidity and interest rates, it is necessary to further reduce repo rate by at least 50 basis points and the CRR by 150 bps to ensure adequate liquidity and reasonable cost of funding.

In addition, there is requirement for provisioning of liquidity to mutual fund and NBFC sectors, to enable orderly operation of financial markets, said the release.

The CII has also asked for the government to guarantee all bank deposits for a two-year period, to maintain depositor confidence in the banking sector.

Rupee volatility

Expressing deep concern about the steadily depreciating rupee against the dollar, CII has made four specific suggestions, which include focused exchange rate management to prevent volatility without reducing rupee liquidity; relaxation of FDI norms to attract foreign capital; utilization of foreign exchange reserves for meeting critical foreign currency needs; and removal of the cap on NRE and FCNR(B) deposits.

Corpus for SMEs

CII has suggested a special corpus for lending to SMEs; in addition to speedy release of government funds for various projects to ensure timely implementation and generation of economic activity.

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