Rate cut could have restored investment cycle: India Inc

Our Bureau | | Updated on: Dec 06, 2021

factory

Expressing their disappointment with the RBI’s decision to hold rates, corporates said the policy of frontloading interest rate cuts should have been allowed to continue as this could have sent a strong signal that the apex bank is aggressively addressing the growth risks in the economy accruing from weak demand conditions.

Guarded approach Chandrajit Banerjee, Director-General, CII, said, “The RBI’s decision to maintain status quo on policy rates indicates a guarded approach towards monetary easing to restrain inflationary expectations. A cut in the interest rate in such a situation would have done much to restore the investment cycle.

“Credit demand is weak and corporates and banks are grappling with a large number of stressed assets, particularly in the infrastructure sector. CII expects that the spotlight would be shifted towards growth and RBI would resume monetary easing in its next monetary policy when there would, hopefully, be much more clarity about the inflation trajectory, the normalcy of monsoons, and possible Federal Reserve actions,” Banerjee said.

Jyotsna Suri, President, FICCI, said, “The decision of the central bank to keep the policy rate unchanged is disappointing for industry. Given that industrial growth still remains volatile and demand conditions have not seen much improvement, there is a need to give policy stimuli to encourage demand and investments.”

On expected lines VS Parthasarathy, Group CFO, Mahindra and Mahindra, said, “The absence of RBI rate action was on expected and understandable lines, but one can’t help the aftertaste of disappointment and doubt, whether an opportunity was missed for setting a lower interest rate trajectory to engender a benign investment climate.”

High-cost borrowing  Anupam Shah, Chairman, EEPC, said the high cost of borrowing, coupled with an increasing number of loans turning into NPAs, have pushed manufacturer-exporters into a kind of vicious circle.

“When exports need a special dispensation, no relief has been given to them. It is time the government intervened to announce some important measures, including interest subvention, to mitigate exporters’ pain. Or else, exports would fall far short of even $300 billion in the current fiscal, against $310 billion in 2014-15,” the head of the apex body of engineering exporters, said.

Published on August 04, 2015
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