As the first quarter of GDP data shows the growth rate slipping to 7 per cent, India Inc has asked for an interest rate cut from the Reserve Bank of India. “While the government stands committed to further the reforms agenda, we need to equally create conditions that provide capital at affordable cost to our entrepreneurs. FICCI hopes that RBI will usher in a deeper cut in policy rates in its September review of the monetary policy,” said Jyotsna Suri, president of the Federation of Indian Chambers of Commerce and Industry.
Confederation of Indian Industry director general Chandrajit Banerjee said, “On the monetary side, the RBI should ease its monetary policy stance and cut interest rates in its forthcoming monetary policy review.”
“Easing of monetary conditions would lead to a lower lending rate framework that would aid both consumption and investment demand, therefore the RBI in its upcoming bi-monthly monetary policy must give due consideration to reviving the industrial growth in the country,” said Associated Chambers of Commerce and Industry of India president Rana Kapoor.
According to the PMI report published by leading global diversified provider of financial information services Markit, the data showed a weaker improvement in the health of the manufacturing sector. “Growth of Indian manufacturing production waned in August on the back of softer improvements in both domestic and foreign demand. This led firms to keep payroll numbers unchanged during month,” Pollyanna De Lima, economist at Markit, said. Adding, “As inflation concerns fade and demand growth loses momentum, further accommodative policy should not be discounted.”
After cutting its repo rate by 75 basis points this year, the RBI kept the rate on hold at its last policy review, saying it wanted to monitor inflation and wait for lenders to further lower their lending rates. Recently, RBI Governor Raghuram Rajan said he hasn't ruled out cutting interest rates for a fourth time, admitting that the world's central problem is continued slowing economic growth.
“We'll look at the data as it comes in and take a further view. We have not said we are finished,” he said in an interview.
