New Delhi, Jan 29 (UNI) Expressing dismay, the Indian industry today said the Reserve Bank of India (RBI) should have fine tuned the interest rates to provide the much-needed impetus to the industrial growth.
The Central Bank has maintained a status quo on the interest rates, with the bank rate at six per cent, the reverse repo rate and the repo rate have been notified at six per cent and 7.75 per cent respectively.
The Cash Reserve Ratio (CRR) stands at 7.5 per cent.
Industry chamber FICCI President Habil Khorakiwala said, ''in the context of the slowdown in industrial growth, RBI could have done some re-thinking on the interest rate regime and fine tuned the rates.
''Apart from housing, construction and consumer goods, the high interest rate regime is adversely impacting the intermediate and capital goods sectors,'' Mr Khorakiwala said.
With inflation moderated to tolerable limits, the RBI could have shifted its emphasis from controlling inflation to sustaining the overall growth momentum, Mr Khorakiwala said.
A revival in the growth of industry and services, he maintained, is essential to sustain a high rate of economic growth, he said.
Overall industrial growth in November this year plunged to 5.3 per cent compared to 15.3 per cent in the corresponding month of 2006-07.
CII felt that following the rate cut by the US Federal Reserve and the growing disparity between the rates in the US and India, the Indian industry had expected the RBI to respond with a rate cut at this review, the chamber said.
A statement from the RBI pointed out that the focus needs to be on control of inflation expectations, price stability and orderly conditions in the financial markets.
There is an underlying focus on stability, which is conservative.
CII feels that this is strategically a good stance, as long as the RBI explicitly makes it known that it can take any action pertaining to the key rates if the situation demands.
The Chamber has also taken note of the terms "conventional" and "unconventional" measures that the RBI can respond with if need arises.
It has also welcomed RBI's move to persuade banks to undertake institutional and procedural changes for enhancing credit delivery to sectors that are employment-intensive.
PHD Chamber reacted by stating that the Apex Bank should have cut the rates.
''The industry was expecting a cut in the bank rate and repo rate to soften the high interest rate structure in the country.
A bank rate cut would have twin positives. It would have reinforced the growth momentum by reversing the negative deviation from trend in the industrial sector. And, it would have contributed to stablisation of investment flows and in turn also contained the inflationary tendencies due to the recent cuts in US Federal reserve rate by 75 basis points,'' Chamber President L K Malhotra said.
Global trends indicate that the cut in interest rate should have been done immediately.
He welcomed the overall stance of the monetary policy of ensuring a monetary and interest rate environment conducive to continuation of the growth momentum and orderly conditions in the market.
Dr Malhotra said that RBI may revisit the key rates after the Union Budget proposals and reduce the bank rate and repo rate.
UNI SR PDT RAI1934