Rate cut could have revved up growth, feels India Inc

Pointing out that maintenance of status quo on key policy rates has been in line with the general expectations Ficci President Harsh Pati Singhania said, as there are signs of revival in business confidence some reduction in key rates at this stage would have helped to provide fillip to corporate investment — in turn boosted economic growth.

Expressing apprehension over funds being scarce for the industry with the government’s borrowing programme, Ficci suggested “it is also essential that liquidity is managed actively so that demand for private sector at viable rates is taken care of while government borrowings are met.”

Rate gap

Further, pointing out the gap between deposit and lending rates of banks, Singhania hoped that an alignment of the rates would be effected soon. While the public sector banks have put in more effort to bring lending rates in line with deposit rates, the private banks need more to align the rates, he regretted.

However, CII was more passive in reacting — saying, that despite the RBI not changing policy rates in its review, it clearly stated that ensuring a flow of credit to the private sector at viable rates is one of its key objectives. Welcoming RBI’s commitment to maintain a policy stance CII suggested that given the uncertainty over the global economic recovery monetary policy must remain accommodative in such an environment so as to ensure a revival in country’s growth path.

Meanwhile, Assocham President Sajjan Jindal echoed industry expression and said he hoped the apex bank would continue its accommodative monetary policy to ensure sufficient credit flows to industry and return India on high growth path. He, however, suggested that the RBI should have taken some measures to strengthen the bond market by allowing Foreign Institutional Investors to participate in it so as to ensure release of commercial papers and bond documents as currently these are being withheld by their subscribers.