India Inc wants RBI sentiment booster

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D Subbarao D Subbarao
SummaryDemands fly in face of facts: Analysts say RBI Guv can not but continue anti-inflationary war.

Apart from rate cuts, the representatives of industry bodies and exporters' organisations that met the Reserve Bank top brass today sought various sector-specific measures in the monetary policy review.

Governor D Subbarao would announce the second quarter monetary policy on October 30. While there is a growing optimism that he may go along with the government following the reforms rolled out in the past one month, the latest inflation numbers may act as spoilsport.

In September, the Wholesale Inflation Index rose to 7.81 per cent, a 10-month high from 7.55 per cent in the previous month, but factory output numbers at 2.7 per cent in August indicated that manufacturing had rebounded.

Many analysts believe the Governor can not but continue his anti-inflationary war.

"The issue is of sentiment. We wanted a stand to be taken by the RBI on the basis that interest rate do come down," Indian Merchants Chamber head Niranjan Hiranandani told reporters, after the customary pre-policy meet.

Mahindra & Mahindra Group's Chief Financial Officer Bharat Doshi said rate cut will boost the sentiment.

Other associations asked for sector-specific measures, rather than a rate cut. SME Chamber of India asked for a special corporate debt restructuring (CDR) like dispensation for small businesses.

"We need a special mechanism like CDR so that our sickness can be handled separately," former PSU banker Ramnath Pradeep, who represented the chamber, said.

Another demand was to automatically restructure the debt of SME vendors supplying to larger corporates.

Because of the present difficulties, SMEs also want a revision in the NPA norms with a relaxation for about a year on the non-payment from the present 90 days, Pradeep said.

Federation of Indian Exporters' Association demanded more dollar credit for smaller exporters which will more than halve their interest outgoes, and a six-month relaxation on the realisation time to 18 months from the present 12 months, association president M Rafeeque Ahmed said.

It also asked the central bank to ensure than credit keeps flowing to the export sector and bankers do not keep away from lending, given the stress on the external front.

Ahmed claimed that RBI has agreed to form a committee to look into factoring demand of exporters.

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