Mumbai, Jun 25 (UNI) The Indian Merchants' Chamber (IMC) today said the latest sharp rate revision by the Reserve bank of India will retard the industrial investment and economic growth in the country.
Reacting to the 50-basis point increase of Repo rate to 8.5 per cent and CRR to 8.75 per cent, made by the RBI yesterday, IMC in a release here said the increase in Repo rate would make access to RBI funds more expensive for banks and the higher CRR would suck out a large portion of the Banks' own funds for impounding as cash reserves.
Though such measures were inevitable, IMC Vice President Gul Kripalani in the release here said, they would sharply deplete banking resources for lending to industry and other productive sectors, which were already reeling under the impact of an 11.05 per cent cost push in inflation.
IMC acknowledged that the interests of industrial growth should not be safeguarded at the cost of householders and pensioners, who were living on their paltry returns from bank deposits, mutual funds and provident funds.
PF trustees and Banks would do well to increase the interest rates on deposits in tandem with the recent RBI rate hikes. This would mobilize larger amounts of savings from the general public, reduce liquidity and demand for goods and services, and help control the upward price spiral.
The current crisis need not be viewed as an irredeemable adversity, the Chamber said. It should be viewed as a Godsend opportunity for reorienting our public policies towards more sustainable development, based on alternative power sources like solar, wind and tidal energies. The World Bank's forecast of a slowdown in India's economic growth to 7 per cent in 2008 appears accurate.
Yet, a timely action now can curb wasteful demand for oil, ensuring fuel efficiency making it possible for the India growth story to continue. This crisis must be viewed as a historical turning point in our long-term development strategy, IMC said.
UNI VK SR AG1925