CII welcomes the cut in SLR to 23% thus improving liquidity in the banking system, but CII is disappointed with the RBI’s decision to maintain the status quo in policy rates and in a way is a missed opportunity to revive growth momentum in the economy.
CII was expecting the RBI to cut key policy rates, especially at a time when major macro-economic indicators are trending down, industry is under a grip of a slowdown and the private sector has been postponing investment decisions due to rising interest costs. In fact, growth of bank credit to the commercial sector has gone down as the private sector is delaying investment due to high cost of credit. A cut in policy rates, at this juncture, would have done much to infuse liquidity in the system which is facing tight liquidity conditions, spur investments among corporates and rev up growth momentum in the economy.
RBI had sufficient head room to cut interest rates as falling global commodity prices, stable core and manufacturing inflation would ease the pressure on prices. In fact, despite having raised interest rates in the past, inflation has persisted while adversely impacting industrial growth and business sentiment. The need of the hour is administrative actions on the part of the government to ease supply bottlenecks which will help ease inflationary pressure.
Chandrajit Banerjee, Director General, CII