The Confederation of Indian Industry (CII) has urged the Reserevd Bank of India (RBI) to intervene and consider a reduction in the interest rates to make credit easily available.
According to CII, the current inflation has been a supply side driven phenomenon that needs to be dealt with cautiously so as to not sacrifice growth over price stability. The chamber observed that the economy is currently facing twin problems of an emerging slowdown and moderately high rate of inflation especially in food grains, basic metals, metals and metal products.
The CII urged the central bank to reduce interest rates and indicate that it is pro-growth. However the chamber also wanted this stance to be backed by fiscal measures. The chamber also strongly felt that restricting demand to manage supply side constraints would not augur well for growth.
Earlier this week, the federation of Indian chambers of commerce and industry ( Ficci) had also urged the government to reduce interest rates to stimulate growth in manufacturing sector, which it observed has suffered a slowdown due to negative growth of consumer durable goods. It had also noted that high interest rates (15%-17%) charged by banks for lending purposes has negatively impacted the profitability of companies by 20-25% and had the potential to even hamper their long term expansion plans.
