Accord precedence to growth over inflation: India Inc to RBI

Surprised by RBI's decision to raise key lending rate, India Inc today said the central bank should now focus on boosting investments and economic growth rather than containing inflation.

"India had entered a cycle where high interest rates are leading to subdued demand conditions resulting in lower growth and investment. This in turn is aggravating the supply bottlenecks and adding to inflationary pressures thereby inducing the RBI to hold on to higher interest rates," CII said in a statement.

It said that on account of slowdown and low industrial production, the RBI should shift its focus towards an accommodative monetary policy stance.

"This is an opportune time to accord a precedence to growth over inflation especially as prices are trending downwards, core inflation is within the comfort zone of the RBI and inflationary expectations are not unduly high in view of a robust performance by the agriculture sector," it added.

Some moderation in vegetable and fruit prices eased December retail inflation to three-month low of 9.87 per cent. Wholesale inflation too has declined to a five-month low of 6.16 per cent in December.

The RBI should take cognisance of the faltering investment and consumption demand which is preventing the economy from realising its growth potential, the chamber said.

Reserve Bank Governor Raghuram Rajan today again surprised the markets by raising key policy rate by 0.25 per cent to 8 per cent in a bid to curb inflation, a move that may translate into higher EMIs and push up the cost of borrowing for corporates.

Expressing concern over the RBI's move, Assocham said: "We seem to have been caught in some kind of vicious cycle which is taking a huge toll on growth".

EDITORIAL OF THE DAY

  • Right to reveal

    Delhi is India’s first state to announce a scheme for witness protection. But what about the witnesses in other states?

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

TODAY'S COLUMNS

Urs Schoettli

New masters of the Financial Times

A few days ago, Japan’s leading financial daily Nihon Keizai ...

Anuja Sharma

Focus mindfully to get the result

Have you ever tried to light a fire using the ...

Gautam Gupta

Our fashion schools need to notch it up

“Creativity is the key to success and primary education is ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture