Expressing dissatisfaction over the RBI decision to keep interest rates unchanged, India Inc today said rate cuts were needed to make the industry invest more and drive economic growth.
"Industry is dissatisfied with the RBI's decision to keep interest rates unchanged as it was really needed, given the lower industrial production in the last few quarters," Assocham President R N Dhoot said.
Expressing similar views, CII Director General Chandrajit Banerjee said: "It is difficult for the RBI to cut down rates, but industry would need to have a rate cut for investment pipeline".
He further said, "We were looking for a rate cut in the policy. We should be strongly expecting a cut in the next review".
The Reserve Bank, in its mid-quarterly review of monetary policy, kept key policy rates unchanged and said future policy action would be determined by the movement in inflation.
Besides, the central bank has kept the cash reserve ratio (CRR), the portion of deposits which banks are required to keep with the central bank, unchanged at 4.75 per cent. Inflation rose to 6.95 per cent in February which is much above the Reserve Bank's comfort level of 5-6
During the April-January period 2011-12, the Index of Industrial Production (IIP) growth stood at 4 per cent, as against 8.3 per cent in same period of 2010-11.
"It is imperative that industry demand picks up to ensure economic fundamentals are strong enough so that minor ups and downs can be weathered by robust economic growth," Banerjee said. Dhoot, however, said: "The decision to keep the cash reserve ratio is fine as the RBI has recently reduced it".
Last week, the RBI had reduced CRR by 0.75 percentage point to 4.75 per cent to infuse Rs 48,000 crore (Rs 480 billion) into the system to mitigate pressure on account of payment of advance taxes.
On RBI's projection of better economic growth in the January-March quarter than 6.1 per cent expansion in third quarter, CII said, "The GDP numbers might be better compared to the last quarter, but we have to look at medium to long-term perspective." Union Budget 2012-13: Complete coverage
