The Associated Chamber of Commerce and Industry of India (ASSOCHAM) said the 25 basis points cut in interest rate, though on expected lines, is too little and too late to infuse the consumer demand which should then induce investment.
Governor Dr Raghuram Rajan himself has acknowledged the fact the investment in the economy is weak and corporate results poor, but still he has refrained from taking somewhat bolder steps. At least 50 basis points cut in the Repo rate was required along with a reduction in the Cash Reserve Ratio (CRR) so that banks are able to reduce their cost of funds, said Mr. Rana Kapoor, President ASSOCHAM.
We agree with the RBI Governor that the primary objective is to keep inflation under control, but the fact is that the country’s headline inflation has remained in negative for months together and CPI- numbers well below the RBI targets. It is time growth is given the focus, otherwise, growing at the fastest rate in the world in terms of GDP ahead of China, would only remain a hype.
Moreover, the problem of stressed assets has also a relationship with the interest burden that the promoters have to bear. Servicing high debt with high cost of borrowing becomes unviable. However, the ASSOCHAM welcomed Dr Rajan concern for stressed projects and his desire that adequate liquidity is provided to them to kick-start them again.