The Hindu Business Line : Cut interest rates to strengthen macro eco of India: CII

NEW DELHI: A day after US Fed slashed interest rate by 75 basis points, industry body CII suggested to cut interest rates to strengthen the macro economic fundamentals of the country in an increasingly uncertain global environment due to slowdown in the US.

"With inflation under control and hovering around 3 per cent, it is the right time for the RBI to cut repo and reverse repo rates to cover the relative competitive disadvantage India is currently in on macro economic fundamentals," Mr Sunil Bharti, Presi dent, CII said in a statement here today.

The statement assumes significance, as the Reserve Bank's quarterly review of credit policy is due on January 29. Repo and reverse repo rates are currently at 7.75 per cent and 6 per cent respectively by 25 to 50 basis points.

The CII also said, the decline in Index of Industrial Production (IIP) in the recent months could trigger a slowdown in the manufacturing sector, especially in the consumer durables sector, which has witnessed a negative growth at 1.7 per cent during the period April-November 2007 against corresponding period last year.

Easing of interest rate would strengthen the economic fundamentals and also boost investors' confidence, Mr Bharti said.

In its recommendations for the quarterly review of Monetary Policy 2007-08, the CII President expressed concern over high interest rates affecting investments and growth and suggested that the time is right to recognise the need to reduce interest rates, which is pivotal to sustain 9 per cent plus GDP growth.

The country would need investment rates in excess of 36 per cent of GDP to achieve 9-10 per cent GDP growth in the medium term, which is again important to raise per capita income and reduce income inequalities, he added. - PTI

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