As the RBI left lending rates unchanged, India Inc today expressed disappointment saying the central bank has chosen to remain over-cautious about the inflation outlook. Industry chamber Assocham said the Reserve Bank (RBI) has “disappointed India Inc” by not reducing the policy interest rates, specially when inflation remains quite benign. “It is clear that the RBI has chosen to remain over- cautious about the inflation outlook even when the key data like crude oil, monsoon, inability of the producers to hike prices made a clear–cut case for softening of the interest rates,” it said in a statement. It also said that a large part of the industry is reeling under a heavy debt and the high interest costs are becoming a big drag on the balance sheets.
“The deceleration in the growth in the last quarter of 2016-17 also underscores the need for lesser cost of money,” it said. “…you cannot find fault with the RBI when its main mandate has been to keep inflation low, and not growth dynamics. However, even at this point of time, the data itself was so supportive of a rate cut, which did not happen pitifully,” it added. The Reserve Bank today left lending rates unchanged citing risks to inflation due to spurt in farm loan waivers by states, but raised lending capacity of banks to support economic growth. Commenting on the monetary policy, PHDCCI President Gopal Jiwarajka said that a rate cut was expected from the RBI as inflation is in the comfortable zone and supply side is expected to improve with a good monsoon on the cards.
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The growth in industry output needs to be accelerated to the level of 9-10 per cent with vital measures for the employment generation in the economy, he said. “Going ahead, we expect repo rate to the level of 5.75 per cent by the end of December and adequate availability of credit to the industry especially to the MSMEs sector,” he added. Surendra Hiranandani, Chairman & MD, House of Hiranandani said that a reduction in borrowing cost could have provided the much needed impetus for growth in the near term.