Federation of Indian Chambers of Commerce & Industry (FICCI) has expressed its disappointment over the recent unchanged monetary policy. FICCI President Pankaj Patel expected the Reserve Bank of India (RBI) to reduce it and not hold the repo rate. FICCI had earlier sought for a 100 bps reduction in interest rate.
Patel expressed that with the current industrial situation, RBI should have further cut the repo rate. “In context of the current industrial situation, we felt that there was a need for a further cut in the repo rate. Growth conditions remain under strain which is reflected in the persistently weak investment activity and the first quarter GDP growth numbers,” said Patel.
Patel further explained that the RBI cited inflationary pressures but feels that we need to give equal consideration to growth prospects too. “While Reserve Bank of India in the policy statement cites inflationary pressures to remain a concern, FICCI feels that we need to give equal consideration to growth prospects. At this juncture, we need a feel-good factor in the economy that would motivate people to spend and buy more,” added Patel.
“Real interest rates remain unduly high and a cut in policy and lending rates would have helped propel demand for interest sensitive sectors such as consumer durables, auto and housing," he added.
Adding to this Patel said that the internal study group formed by RBI to assess the efficacy of MCLR from the point of view of monetary transmission has submitted its report and states that effective transmission of monetary policy has not transpired.
"We would examine this detailed report once it is placed for public comments," he added.