The Hindu Business Line : Trade welcomes policy; concerned over inflation

The RBI Governor, Dr Y.V. Reddy, flanked by his deputies (left) Ms K.G. Udeshi, and Mr V. Leeladhar; and (right) by Mr Rakesh Mohan, and Ms Shyamala Gopinath; on his way to announce the Credit Policy in Mumbai on Tuesday. - - Paul Noronha

Mumbai , Oct. 26

TRADE and industry circles have welcomed the RBI's Mid-Term Review Policy of Annual Policy Statement.

According to Mr Ashwini Kakkar, President of the Bombay Chamber of Commerce and Industry, the mild increase in the repo rate by 25 basis points was inevitable in the given external environment, which may not affect growth prospects. "By estimating inflation expectation at 6.50 per cent and downward revision in growth by 0.50 per cent, RBI is upping the ante for possible tighter monetary regime," he pointed out.

He welcomed RBI's policy stance on increase of limits up to Rs 15 lakh for housing loans and the relaxation of forward covers for exporters.

While complimenting RBI for facilitating credit delivery as indicated by the increased credit deployment/demand, he pointed out that the decrease in forex flows and deposit accretion in the banking system could lead to liquidity pressure.

The Indian Merchants Chamber (IMC) has welcomed the retention of bank rate at 6 per cent.

However, Mr Nanik Rupani, IMC President, felt that there was a need for strong measures to control the rate of inflation.

"The Government must tighten its belt, curtail unplanned expenditure and ensure more effective delivery of subsidies to the target groups," he pointed out.

The IMC president felt that there was enough reason for jubilation by the manufacturing sector because the non-food credit increased by 11.5 per cent this fiscal as against an increase of six per cent last fiscal.

According to Mr Y.M. Deosthalee, CFO of Larsen & Toubro Ltd, the RBI policy is supportive of the revival in the economy, particularly the industrial sector, to the extent of holding the benchmark rate unchanged. Encouraging NRE deposits and removal of the seven and 14 day repo could improve liquidity available to the industry, he said.

However, Mr Sandesh Kirkire, Chief Investment Officer of Kotak Mahindra Asset Management Co Ltd, felt that "RBI is clearly concerned about inflation, despite its assertions that inflation is largely supply driven, it increased CRR in September and has now increased repo rate, a move unanticipated by the markets."We, however, do not believe RBI will consider any further repo rate hikes in the next few months. In fact, any such move could jeopardise growth prospects ," he said..

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