'Recessionary fears to weigh in favour of rate cut'

Written by Agencies | New Delhi, January 28: | Updated: Jan 28 2008, 18:56pm hrs
Recessionary fears in the global economy, slowdown in domestic industrial production in November 2007 and the widening gap between the US and Indian interest rates have set the stage for a policy rate cut by the RBI on Tuesday, an Assocham CEO survey has said.

Majority of the 285 CEOs surveyed by the Assocham Business Barometer (ABB) felt that the Indian economy caught between early but tentative signs of sluggish domestic growth and weakening global demand would require policy support to retain the growth achieved consistently for the past three years.

As many as 84 per cent of the respondents of ABB done prior to the RBI policy review hoped for a cut in the repo rate by the Reserve Bank in view of the 75 basis points reduction in the Federal Reserve Rate.

The corporate heads felt that the interest rates have reached their peak and are in fact hurting the industrial growth.

Around 90 per cent of them said the continuous policy inaction of the regulator may hurt the confidence of the business community.

While 70 per cent of the respondents felt that ideally there should be 50 basis points cut in the repo rate along, 51 per cent said the reduction could be only 25 basis points.

"The industry expects the central bank to undertake moderation in interest rates under the global as well as domestic compulsions," Assocham President Venugopal Dhoot said.