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".

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • E-auction and eventual privatisation of coal industry are welcome steps

    The government’s decision to privatise the scam-ridden coal industry through a presidential ordinance will eventually end the monopoly of public sec

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Tushar Gandhi

Sustainable model for rural sanitation

Prime minister Narendra Modi has promised to build a toilet ...

Rajgopal Nidamboor

Synchronous balance is vital for one and all

Imagine that you are playing an electronic game, or actually ...

Shona Adhikari

When women to birds become a painter’s muses

This week the focus is on renowned artist Amitabha Banerjee, ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture