Industry associations have welcomed the Reserve Bank of India’s decision to hold rates at this point of time.
“While being fully cognizant of the imperatives of anchoring inflationary expectations, the Confederation of Indian Industry (CII) is of the view that in the coming months, owing to a good agricultural performance, the prices of food items will moderate,” said CII Director-General Chandrajit Banerjee.
“With the rupee having stabilised, the fuel prices would also not see any sudden increase.
“To some extent that obviates the need for further monetary tightening. Therefore, the RBI has demonstrated restraint and foresight to strike the right balance between inflation and growth,” Mr. Banerjee said.
“The CII has maintained that the current spike in inflation is a supply side phenomenon and, therefore, a tight monetary policy would hurt growth while proving unequal to the task of tackling inflation,” he said.
The Associated Chambers of Commerce and Industry of India (Assocham) gave kudos to RBI Governor for not being over-reactive to the noise of headline inflation and his forward reading of the situation that suggests that food and vegetable prices are softening and, there is no merit in further punishing growth.
“We also would agree with the RBI Governor that a pause on interest rates despite spike in inflation, for now, should not be taken as being a soft stance on price rise. His commitment to see stable prices is very much reflected in cautionary words which suggest that should there be a need, the central bank would remain vigilant and take action”, said Assocham President Rana Kapoor.
“We are happy that the RBI has taken cognisance of the weak state of the industrial economy, and hope that the next move will be in the direction of lowering of policy rates. At this juncture, we certainly need to push all buttons to safeguard growth and revive investor sentiment,” Federation of Indian Chambers of Commerce and Industry (FICCI) President Naina Lal Kidwai said.
“The government needs to address food prices on a war footing reviewing procurement, warehousing and logistics strategies. We need to remove impediments to movement of food, to ensure government stockpiling is not contributing to food inflation, and to act strongly against hoarding,” she added.
“Calibrated policy stance by the Reserve Bank is inspiring in the wake of volatile global economic environment and vulnerabilities on the domestic front,” according to PHD Chamber of Commerce President Suman Jyoti Khaitan.
Attributing the status quo maintained by the RBI to the shrinking IIP data, FIEO President M. Rafeeque Ahmed said: “The rising interest rates have affected exports competitiveness as even after factoring 3 per cent interest subvention for eligible sectors, cost of credit is 4 to 5 per cent over international benchmark.’’
While retail inflation soared to a nine-month high of 11.24 per cent in November, the index based on wholesale prices zoomed to a 14-month high of 7.52 per cent last month. Meanwhile, the Apparel Exports Promotion Council (AEPC) Chairman A. Sakthivel expressed concerns that the momentum of the garment export growth might slow down.