The Hindu Business Line : Monetary policy: India Inc’s concern

New Delhi, Jan. 29 India Inc on Tuesday expressed reservations over the Reserve Bank of India’s decision to keep Bank Rate, reverse repo rate, the repo rate and the cash reserve ratio unchanged as part of its third quarter review of the monetary policy.

Reacting to the RBI Governor, Mr Y.V. Reddy’s decision, Mr Habil Khorakiwala, President, the Federation of Indian Chambers of Commerce and Industry, said that in the context of the slowdown in industrial growth, the RBI could have done some rethinking on the interest rate regime and finetuned the rates. A revival in the growth of industry and services, he added, is essential to sustain a high rate of economic growth.

Good stance: CII

The Confederation of Indian Industry (CII), meanwhile, found the RBI’s stand on the monetary policy “neutral” and a deviation from the “hawkish” stand taken by the central bank earlier. Mr Reddy’s current move has an underlying focus on stability, which is conservative, pointed out CII, adding that in uncertain times this is strategically a good stance, as long as the RBI explicitly makes it known that it can take any action pertaining to key rates if the situation demands.

CII also welcomed the RBI’s move to persuade banks to undertake institutional and procedural changes for enhancing credit delivery to sectors that are employment-intensive. The industry association, however, also reinforced its earlier demand for fuel price corrections in the domestic market to deal with the situation of rising international fuel prices.

Reacting on the RBI’s Credit Policy review, the Assocham President, Mr Venugopal N. Dhoot, said the unchanged rate would make it difficult for the various industry segments to cope with the slackening demand, rising imports and high borrowing cost. Mr Ganesh Kumar Gupta, President, Federation of Indian Export Organisations (FIEO), echoed Assocham’s view of greater FII cash inflow and greater ECB’s giving rise to further inflation.

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