India Inc has called for reversing the monetary policy stance of the RBI given that inflation has dipped to 7.25 per cent in June from 9.51 per cent during the same period last year.

The figures clearly indicate that the current inflation is induced by shortages – in food articles, minerals, metals and products of upstream industries, the Assocham said in a statement.

“There is clearly a case for loosening of policy rates for encouraging investment and for taking initiatives for increasing supplies,” said Mr D.S. Rawat, Secretary-General, Assocham.

The Confederation of Indian Industry (CII) too stressed the need to cut rates.

CII noted that the high food and fuel prices have been the major contributors for June inflation and strongly recommended policy initiatives to ease the supply side bottlenecks in agriculture.

The policy initiatives include delisting perishables from the APMC Act, permitting farmers to directly sell their produce in the market and open up FDI in retail.

“There is a need to address the problem of fuel inflation, which has been compounded by the recent rupee depreciation, by permitting oil companies to access foreign exchange requirements for oil imports directly from the RBI through a special window,” said Mr Chandrajit Banerjee, Director-General, CII.

Mr R.V. Kanoria, President of the Federation of Indian Chambers of Commerce and Industry, said “The decline in inflation presents an opportunity for the RBI to revisit its monetary policy stance.

“We need some fiscal stimulus, an easing of monetary policy and a set of policy reforms that would lift the overall business confidence level. A reduction in interest rates at this juncture would encourage entrepreneurs to revive their investment plans, which in turn would add to both growth and employment generation.”

heena.k@thehindu.co.in

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