India Inc says RBI not accommodating; unhappy with status quo

New Delhi: Unhappy with Reserve Bank's statusquo policy stance, India Inc said the central bank could have been more accommodating by reducing interest rate to boost subdued economic growth. The rate cut, the industry chambers argued, could have given a positive signal to the manufacturing sector, which is undergoing difficult times."Although there has been some improvement in core sector   activity, manufacturing has been subdued due to weak demand, therefore curbing major improvement in capacity utilisations. "We continue to hope that RBI may send positive signals   even sooner than the next policy review cycle," FICCI   President Sidharth Birla said in a statement.  

There were hopes that RBI could have found a merit in an   accomodative stance on interest rate cycle on persistent weak   demand and sustained moderation in inflation, FICCI said.   Reserve Bank today kept the repo rate unchanged at 8 per   cent and cash reserve ratio (CRR) at 4 per cent, citing reason that a change in the monetary policy stance at the current   juncture is "premature".  

Reading out the policy in a conference, RBI Governor, Raghuram Rajan said, "There is still some uncertainty about the evolution of base effects in inflation, the strength of   the on-going disinflationary impulses, the pace of change of   the public’s inflationary expectations, as well as the success   of the government’s efforts to hit deficit targets". CII said when economic recovery is still fragile and industry is growing at a faltering pace, bold decision of RBI   to ease interest rates would have particularly benefited the credit starved SME and improved the poor credit offtake by industry. 

RBI has overlooked strong demand from the industry for a cut in interest rates. The industry’s demand for lower interest rates was fully justified, Assocham said. "Growth alone can take care of employment and eventually cut inflation further by increasing the supply line, and bringing in structural changes for tackling inflation on sustained basis", it added.