The Hindu Business Line : ‘Wrong signals won’t help’

New Delhi, Nov. 3 The FICCI President, Mr Rajeev Chandrasekhar, said on Monday that the RBI Governor should not send out the wrong signals when there is a crisis of confidence.

“When the RBI Governor goes on national television and says I don’t know what next year is going to be like, you can see how people, the credit banks and the market will panic,” said Mr Chandrashekhar, addressing a press conference following the Prime Minister’s meeting with industry representatives.

“If this crisis of confidence is allowed to continue, it will most certainly become a self-fulfilling prophecy and we can then look forward to dramatic slowdown as in the mid-90s.” he added.

Calling for a further easing of the tight monetary policy, FICCI has requested the Prime Minister to ensure a higher flow of credit and refocus on growth.

FICCI wants the Cash Reserve Ratio to be reduced to 4.5 per cent and repo rates be fixed at 5 per cent in the near term.

According to Mr Chandrashekhar, trying to manage inflation in an economy going downhill while trying to stimulate growth is a contradiction. “Commodities and fuel prices are declining, and we are of the belief that they will remain at a certain level and not go up over the next two-three years, and will not pose a threat to inflation,” he said.

Liquidity infusion was an urgent need and yet banks, in spite of rate cuts, were being overcautious.

“About 70-75 per cent of our members are in the middle of expansion programmes and desperately need credit and capital from banks and markets,” he added.

Growth target

FICCI would also like to see FDI caps in Telecom, Aviation, Retail and Insurance to be relaxed. Exporters are already suffering, since many quarters are now being hit by lack of pre-shipment credit, and FICCI suggests that the 90-day window for refunding of Excise Duty, an important source of working capital, be reduced to 7-15 days. It would also like railway rates to be reduced and Non-Resident External (NRE) deposit rates increased

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