New Delhi: Expressing disappointment over RBI’s decision of leaving interest rates unchanged, India Inc today said there is an urgent need for rate cut to boost industrial growth and take economy to a higher trajectory.
“A cut in the policy rates could have given some boost to the industrial sector and helped the economy regain the growth momentum,” Assocham President Rajkumar Dhoot said.
The Reserve Bank today kept interest rates unchanged giving priority to checking inflation over growth, disappointing industry as well as retail borrowers who were expecting at least 0.25 percent rate cut.
“Inflation is going up because of supply-side issues. We are extremely disappointed (over unchanged rates),” CII Director General Chandrajit Banerjee said.
The wholesale price-based inflation was 7.55 percent in May. At the retail level, the Consumer Price Index (CPI)-based inflation for May was 10.36 percent.
Keeping in view the current industrial and economic scenario, CII said, “the RBI should immediately cut interest rates by 1 percent”. Ficci Secretary General Rajiv Kumar said by reducing interest rates, the RBI might help in increasing investments, and improving supply side.
Economic activity in 2011-12 moderated sequentially over the quarters to take growth to a 9-year low of 5.3 percent in Q4. For the entire fiscal too GDP growth rate plunged to 6.5 percent, lower than the 6.7 percent reported during the peak of post-Lehman collapse credit crisis, triggered in 2008.
Besides, the Index of Industrial Production (IIP) increased by just 0.1 percent in April 2012.