The Hindu Business Line : RBI should cut interest rates, says Assocham

NEW DELHI: The RBI should cut interest rates in the wake of inflation touching a five-year low, industry body Assocham said on Wednesday. "A survey of 215 CEOs and managing directors has revealed that 67 per cent of them felt the stage is set for RBI to relax monetary policy in the wake of inflation touching a five-year low of 3.23 per cent,'' Assocham said in a release.

The central bank is scheduled to announce its mid-year monetary policy review on October 30. The release did not mention the name of companies or sectors of the CEOs who took part in the survey or the time period when it was conducted. The industry cham ber also said 64 per cent of those responded felt if inflows by foreign institutional investors maintained their current pace, RBI would find it difficult to check the appreciation of rupee against the US dollar.

The investments by FIIs in September increased by $3,205 million as compared to $1,318 million in the same month last year, recording a whopping 143 per cent rise. Almost 71 per cent of them believed the Indian currency may further strengthen to $37 to a dollar by the end of this fiscal in March 2008, a rise of 15-16 per cent in one year. About 84 per cent felt it would be difficult to achieve the export target of $160 billion as growth in the second half of this fiscal is likely to slow down, it said .

Separately, industry body PHDCCI said the RBI should cut the cash reserve ratio, the percentage of mandatory deposits that all banks must park with the banking regulator. The chamber said the RBI should reduce the CRR to three per cent from six per cent currently in its forthcoming review of the monetary policy. "This will improve liquidity in the system,'' it said in a press release. - PTI

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