Industry bodies have welcomed the RBI's move to cut the cash reserve ratio by 50 basis points (from 6 per cent to 5.5 per cent) leading to the release of Rs 32,000 crore into the banking system.
“This will help fund viable projects held up due to liquidity crunch. However, the risk to inflation and inflation expectations continue to be high, forcing the RBI not to change key interest rates,” said Mr D.S Rawat, Secretary-General, Assocham.
While the Confederation of Indian Industry agreed with RBI's outlook of 7 per cent growth in fiscal 2011-12 and non-food credit growth of 16 per cent, it stressed on the need to start reducing the repo rate as well, to revive the investment cycle.
The case for repo rate reduction was also stressed by the FICCI President, Mr R.V. Kanoria , who said, “Given the uncertain growth prognosis for the current fiscal, a cut in repo rate may have acted as a strong enabling factor in spurring investment activity.”