Assocham has said that it is “deeply disappointed” by the Reserve Bank of India’s decision to leave interest rates unchanged in its monetary policy review on Monday.

The central bank was expected to cut key policy rates as a follow-up of the slew of reforms announced by the Government last week. It instead cut CRR by 25 basis points.

“The Reserve Bank of India has once again deeply disappointed the industry which was expecting it to worry about a sharp deceleration in growth and go in for a substantial cut in the interest rates,” the industry chamber said.

However, it added that the cut in the CRR rate would somewhat address the problem of liquidity and the banks may also be prodded into marginally reducing the retail loan rate.

Assocham said that RBI and the Government both have recognised that the high cost of funds has become one of the big issues not only for the manufacturing sector but also for the consumers in several interest-sensitive sectors like automobile and housing.

Besides, exporters who have been facing harrowing times in the international markets are feeling the heat of increasing cost of money. Manufacturing is becoming unviable and new investment has receded significantly.

“Assocham is concerned over the fact that the RBI has missed an opportunity to use the monetary policy to pump up demand, especially in the coming festive season. The sentiment, which looked up after the Centre took courageous reforms friendly decisions like FDI in multi-brand retail and hike in diesel prices has been negated by the RBI inaction today,” said Assocham chief, Rajkumar Dhoot.

(This article was published on September 17, 2012)
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