Inflation and GDP forecasts are positive: CII

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New Delhi, Jul 28: Noting that the central bank faces tough challenges in the current macroeconomic situation, Confederation of Indian Industry (CII) welcomed the quarter monetary policy review that the Reserve bank of India (RBI) released on Tuesday, Jul 28.

Mr Venu Srinivasan, President, CII welcomed the RBI's committment to maintain a policy stance that will return the economy to a high growth path. Even though it could not change the key rates, RBI has pormised to ensure credit flow into the the private sector at viable rates.

Speaking on the challenges, Mr Srinivasan pointed out that the first challenge that the bank faces is to ensure that hardening of bond yields across maturities due to government"s borrowing programme does not lead to crowding out of private sector credit.

He pointed out that the forecast on the Inflation and GDP growth rates were positive and that it was due to the inflation in essential commodities such as food remains high and prices of fuel and other commodities that the wholesale price index of India is still in a dodgy territory.

CII also pointed out that due to the uncertainty of the global economic recovery, the monetary policy must remain accommodative so as to ensure India"s growth.

It also recommended a 25 bps reduction in the repo and reverse repo rates in the half yearly review scheduled in Oct 2009.

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