Kerala industry gives thumbs-up to credit policy

The RBI’s latest policy stance has been favourably received by the industry in the State.

C. Balagopal, managing director, Terumo Penpol, believes this would release additional credit to business and industry.

DEMAND STIMULUS

This will have some impact on stimulating demand, which may play out in the auto, consumer durables, and real estate sectors.

“To that extent, this may help stimulate economic activity and investment,” he told Business Line .

But a caveat was in order. Main factors slowing the economy are structural in nature, and cannot be addressed through monetary measures.

There are already severe power shortages, and there is no need for more demand to stimulate demand for power. “What we need is strong action to complete power projects already under way.

ENSURE FUEL

Ensure coal and fuel supplies to power stations apart from taking up additional power projects on a priority basis.

Highway and port projects should be completed. High speed rail corridors should be taken up as a national priority.

Fiscal sops in the form of subsidies are politically attractive, and have been resorted to by various governments. But they also lead to a huge waste of public resources with doubtful economic benefits.

The cut of 25 basis points in repo rate was expected but a similar cut in cash reserve ratio is indeed a bonus, said Vikash Sureka, chief financial officer of IBS Software services.

CRR BONUS

Coming after nine months, the reduction signals the confidence of RBI in keep inflation under control despite extra money being infused into the system, Sureka told Business Line .

“Hopefully, the macroeconomic dynamics has entered a period of stability and we can look forward to reign in current account and fiscal account deficit which were getting worrisome.”

The reduction in the rates will be relief for banks as a high CRR ratio locks up funds for which they earn nothing.

LESS SCARCE

Now banks will have more to lend. The additional liquidity will make credit less scarce and less dear benefiting businessmen and individuals.

This should fuel all round growth and also have a positive impact on business sentiment to create new investment opportunities.

“Directionally, this is a great step forward and we hope that there is further headroom left for future cuts,” Sureka said.

vinson.kurian@thehindu.co.in

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