Companies and industry associations, on Monday, expressed disappoint- ment over the Reserve Bank of India’s decision to keep policy rates unchanged.

“The RBI has taken a cautious stand largely influenced by a steep depreciation of the rupee, which is likely to push up inflation. Today, companies are increasingly looking for more working capital caused by tight liquidity cycle and extended credit periods. Thus, there has to be an initiative towards bringing in more liquidity into the market,” said Seshagiri Rao, Joint Managing Director, JSW Steel and Group CFO.

Associated Chambers of Commerce and Industry Association of India President Rajkumar N. Dhoot said, “If we read the RBI policy document, we get a clear signal that it is being done under large economies. We cannot be going just by a sole consideration of rupee depreciation and its possible impact on inflation. Why ignore other factors such as arrival of good monsoon, which will surely boost food supply to have a dampening impact on the price situation.”

“WPI inflation is well within the comfort zone, but still the RBI seems to have been influenced by CPI inflation of food items. The issue on food prices is not supply constraints per se. Can high interest rates resolve the problem of food distribution and consequent high prices?” Mr. Dhoot asked.

Confederation of Indian Industry Director-General Chandrajit Banerjee said “The decision of the RBI to hold policy rates on status quo is disappointing. At a time when growth and inflation dynamics call for an accommodative monetary policy, the RBI has taken a cautious approach of attending to the prospect of a possible resurgence in inflation over reviving growth in the economy.”

“The quarterly GDP figures point towards a poor health of the economy even while industrial slowdown has not bottomed out and sluggish private and government capital expenditure is hurting investment in industry and economy.

In such a situation the CII is looking at the RBI for interventions which would improve the cost and availability of credit to industry.

The CII hopes that the RBI would not wait for the next quarterly review, but intervene sooner if the economic condition warrants a mid-course correction,” Mr Banerjee added.


Monetary policy and rupee volatilityJune 18, 2013

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