FICCI Asks RBI For A Rate Cut To Propel Investments | SupportBiz

Managing Growth

FICCI Asks RBI For A Rate Cut To Propel Investments

While FICCI is optimistic about GDP growth, it wants revival of capex to push the growth and create new employment avenues


Ahead of the release of bi-monthly monetary policy of the RBI, Dr Jyotsna Suri, President, FICCI, has urged for a cut in the policy rate and further easing of monetary policy.

“Revival of capex is critical to push the growth further and create new employment avenues. While government has given a push to public investments in infrastructure, private investments are still languishing on account of low capacity utilisation and weak consumer demand,” said Dr. Jyotsna Suri.

“Successive rounds of FICCI’s Business Confidence Survey show that investment outlook remains cautious, with majority participants citing availability and cost of credit to be a major constraining factor. Reduction in lending rates by financial institutions is the need of the hour, which has also been acknowledged by the Finance Minister and the Chief Economic Adviser recently,” she said.

“With inflation largely under control, we expect the Central Bank to reduce the repo rate by at least 50 bps to expedite revival of private investments and demand for housing, automobiles and consumer durables. A cut in CRR by 50 bps is also desirable as it will release liquidity in the system and enable effective transmission into lower lending rates by banks,” added Dr. Suri.

'GDP at 7.3% is encouraging'

Dr. A Didar Singh, Secretary General, FICCI, has aid that GDP growth of 7.3% in 2014-15 is encouraging and is in line with broad expectations.

"The Government’s progressive stance on economic reforms and on improving ease of doing business has helped in creating a positive sentiment over the past one year. With this holistic approach on reforms, we expect GDP growth to improve further in the next 6-12 months. In fact, results of FICCI’s latest Economic Outlook Survey peg GDP growth at 7.8% in the current fiscal year,” he said.

While economic conditions have been mostly benign since the beginning of 2015, some downside risks continue to pervade.

Agriculture output may be impacted with a sub-normal monsoon forecast this year, weak demand remains a persisting concern and a firm turnaround in the domestic capex cycle is awaited.

Further, results of FICCI’s Business Confidence Surveys indicate that companies are still apprehensive about undertaking fresh investments and high cost of credit remains a major constraining factor for them.

Also, the survey results indicate strain on parameters like profits and exports, which is also reaffirmed by the actual quarterly corporate results.

“Inflation, which was a major concern factor has been on downward trajectory. We hope that Reserve Bank will cut the repo rate by 50 bps in the monetary policy review to be announced next

week. Also, a cut in the CRR by 50 bps can be looked at to allow for effective monetary transmission by banks in the form of lower lending rates for industry and consumers. This will give an immediate respite to the manufacturing sector and help in stepping up investments”, added Dr. Singh.

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