India Inc calls for rate cuts

press trust of india

New Delhi, Nov 15: India Inc has strengthened its demand for lower interest rates amid a dip in Wholesale Price Inflation for two consecutive months and the liquidity crunch in the wake of demonetisation of 500 and 1,000 rupee notes.

Industry bodies noted that going forward, prices are expected to remain muted as favourable monsoon would augment food supplies in the market and international commodity prices will continue to stay under pressure.

Wholesale inflation had eased to 3.39 per cent in October as food articles, led by vegetables, witnessed softening of prices.

The Reserve Bank is expected to announce its monetary stance in the fifth bi-monthly policy statement December 7.

Ficci President Harshavardhan Neotia urged the RBI to continue with an accommodative stance, support the sentiment of investors and consumers and stabilise demand.

“An immediate 50 basis points cut in repo rate should be considered by RBI as well as some measures may be introduced to provide easy finance for sectors such as housing, automobiles and consumer durables,” he said.

PHD Chamber of Commerce and Industry President Mahesh Gupta said that demonetisation would also help prices to remain under control in the coming months.

Good monsoon and abundant supply of kharif crops coming into the market in the recent months has checked the rise in prices of many commodities, Gupta said.

“The average WPI inflation stood about 3 per cent during Apr-Oct and we are hopeful that inflation will fall below 3 per cent in the coming months,” he said and added that the repo rate at this juncture should not be more than 6 per cent to give a big push to the economy with the new currency in circulation.

CII Director General Chandrajit Banerjee said that in the prevailing scenario, RBI should continue with its rate easing cycle to support demand in anticipation of a benign inflationary outlook for the future.

Assocham Secretary General D S Rawat said the Indian economy is in need of strong actions from the government to address the structural issues of demand and supply.

The Monetary Policy Committee headed by RBI Governor Urjit Patel last month cut benchmark interest rates by 25 basis points to 6.25 per cent.

Retail or CPI inflation had dipped to 14 month low of 4.20 per cent in October. Retail food price inflation in October was 3.32 per cent, lower than 3.88 per cent recorded in September. The WPI food inflation basket too showed moderation with inflation at 4.34 per cent in October, as against 5.75 per cent in September.

While RBI governor Urjit Patel had signalled more tolerance towards inflation, the easing in CPI data was in line with the RBI’s inflation target of 5 per cent for March 2017.

Industry demand for rate cut comes after data showed that factory output in the April-September period declined by 0.1 per cent compared with 4 per cent growth in the year-ago period.

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