RBI Guv Raghuram Rajan's repo rate hike can't tame inflation: EEPC

Sep 20 2013, 22:13 IST
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Rajan surprised the markets by taking a hawkish line in his much-hyped maiden policy review. Express photo: Prashant Nadkar Rajan surprised the markets by taking a hawkish line in his much-hyped maiden policy review. Express photo: Prashant Nadkar
SummaryEEPC said the inflation is rising because of the supply issues, especially the inefficiencies in the supply chain.

Expressing disappointment over Reserve Bank of India (RBI) Governor Raghuram Rajan's decision to hike the key policy rate, engineering exporters' apex body EEPC today said a high interest regime will not help curtail inflation, but instead affect exports and eventually the economic growth.

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"The exporters community, especially in the manufacturing sector, is feeling let down by the continuing high interest regime being maintained by RBI in its unsuccessful bid so far to check inflation. By revising upward the repo rate, RBI's obsession with inflation continues and growth suffers in the trade-off," Engineering Exports Promotion Council (EEPC) said in a statement.

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The central bank today increased the repo rate by 0.25 per cent to 7.5 per cent.

EEPC said the inflation is rising because of the supply issues, especially the inefficiencies in the supply chain.

"The core inflation is quite low and RBI should have taken a cue from this figure which reflects how the entire industrial sector is going through a painful period of demand slowdown," it said.

"High interest rates coupled with high inflation are adding to the pressure on the cost of manufacturing and making our exports uncompetitive in global markets. We cannot always depend on the currency depreciation for making our products competitive. The structural issues arising from the high cost economy must be addressed first," it said.

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