Accord precedence to growth over inflation: India Inc to RBI

Tags: Economy
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

  • Finalising the formula for fixing the fair market value of shares calls for a detailed debate

    Whenever there is a change of regime at the Centre, the new government has its tasks cut out for execution.

FC NEWSLETTER

Stay informed on our latest news!

TODAY'S COLUMNS

Roopen Roy

High CEO pay and the gaps it leaves

Unlike the UK, Norway took a remarkable decision with its ...

Zehra Naqvi

Watch your words, for they can kill

You must’ve heard the ph­rase ‘if looks could kill’. Ever ...

Dharmendra Khandal

Biodiversity day has come and gone. Yet again

Every year on May 22, world celebrates international biodiversity day. ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture