?Prices need to come down to boost confidence?

ICICI Bank chief executive officer and Confederation of Indian Industry?s president KV Kamath on Tuesday said prices of products need to come down to boost sagging confidence in the economy. He also felt there is still room for rate cut by the Reserve Bank to inject more liquidity into the banking system.

?India has seen a loss of confidence because of suddenness with which certain global price shifts have taken place. This suddenness has shifted prices of most products which led to demand being evaporated. I think confidence can come back once the price discovery takes place and you have demand supply equilibrium coming in. I think this would not take too long at least in India,? Kamath told reporters at India Economic Summit here.

Kamath said the industry has taken various cost-cutting measures in the last few months and the input cost has also fallen. This reduction in costs, he said, may be used to reduce prices of products. ?At this point of time, they are determining where the equilibrium is. It would take just a little more time to work through, and you will see new pricing model for most goods, particularly the common goods,? he said.

He said the finance minister P Chidambaram has expressed the government?s willingness to consider excise moderation, and the industry should present the areas where the tax could be cut. Chidambaram also said that he expects the industry also to cut prices.

Kamath said dollars are coming into the country in the form of NRE and FCNR(E) deposits, but the foreign capital market will continue to be ?lean?. ?The corporate India should make investment plan considering the state of the capital market,? he added.

On real estate prices, he said the correction has to take place, and until that happens buyers would be difficult to come by. ?Till the customer is satisfied that the rates have eased and it gets into his mind that there is no further scope, he would be reluctant to buy,? Kamath said.

The ICICI Bank?s chief said that lower rates would also encourage banks to give a fillip to secured loans. He said ICICI Bank has been ?uncomfortable? in lending at high rates and the banking sector in general will give a fillip to lending against home or car at lower interest rates. Banks will go slow on unsecured loans because of ?challenges? in recovery, he added. He said the RBI has taken various monetary measures to ease liquidity, but there is room for further rate cuts. In the last two months, RBI cut cash reserve ratio, repo rate, and statutory liquidity ratio to inject around Rs 2,70,000 crore, but the industry is still complaining of unavailability of loans. ?Banks have kept some money themselves, because they are not sure what the policy stance is going to be in the future. If a signal comes that inflation is really beaten and may be a bit more liquidity is eased, the equilibrium condition will quickly surface,? he said.

?Banks or any other player in the system would like to see enough liquidity. First you should reprice borrowing and then we would reprice credit. Steps are being taken, those steps now have to be realised in the market place and then the credit rate will be reduced.