Industry presses for interest rate cut

Tags: News
Expressing serious concerns over the industrial output remaining flat at 0.1 per cent in January, India Inc reiterated its demand for an interest rate cut by the Reserve Bank to kick-start investments, especially keeping in view the fall in retail inflation.

"What is extremely worrisome is that the decline in investment and consumption demand is showing no signs of reversing," CII Director General Chandrajit Banerjee said.

"The decline of CPI inflation should spur the RBI to give a predominance to growth and cut interest rates," he added.

Easing onion and potato prices pulled retail inflation in February to a 25-month low of 8.1 per cent.

"Negative growth in manufacturing, though seems to be waning, remains a cause of concern. Depressed demand and investment conditions continue to plague the sector. With little room for any new policy measure to address the slowdown, we expect the sector to register a subdued growth in next few months," Ficci President Sidharth Birla said.

"With the trend reflected in retail inflation and IIP data released today, we see no reason why the RBI should not bring the focus back on growth and cut interest rates in the forthcoming policy announcement," he added.

The RBI, which has maintained a hawkish interest rate regime to tame inflation, is scheduled to announce the next monetary policy on April 1.

"The negative growth of manufacturing has got serious implications for the overall growth, employment and trade balance," Assocham Secretary General D S Rawat said.

"The RBI needs to take a constructive view while undertaking the mid-quarter review of its credit policy," he added.

The manufacturing sector, which constitutes over 75 per cent of the index, declined 0.7 per cent in January as against growth of 2.7 per cent in the year-ago period.

"Since WPI inflation and CPI inflation are in the softening trend and subsiding month after month, RBI at this juncture should come forward to reduce the policy rates and help the industrial activity to recover at a faster pace," PHD Chamber of Commerce President Sharad Jaipuria said.

The marginal improvement in the index of industrial production (IIP) was mainly on account of higher power generation and mining sector output, while manufacturing declined.

Power generation posted a growth of 6.5 per cent in January, compared with 6.4 per cent in the same month of 2013. Expansion in power generation was 5.7 per cent in April-January from 4.7 per cent a year ago.

The mining sector, with a weight of about 14 per cent in IIP, grew 0.7 per cent in January as against a dip of 1.8 per cent in the same month in 2013. During April-January, mining output shrank 1.5 per cent as against a dip of 1.8 per cent a year earlier.

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