Expressing disappointment over the Reserve Bank of India’s decision to keep the key policy rates unchanged, the apparel manufacturers and technocrats in Tirupur knitwear cluster reiterated the need for making monetary policies that should compement industrial growth.
On Wednesday, the RBI, in its monetary policy review, had kept the policy repo rate under the Liquidity Adjustment Facility (LAF) and Cash Reserve Ratio unchanged at 7.75 per cent and 4 per cent, respectively.
“At a time when the overall industrial growth has been sluggish in the country, the RBI should have reduced the repo rate which was hiked on the previous two occasions citing inflationary pressures, widening current account deficit (CAD) and a few other reasons,” S. Dhananjayan, a senior chartered accountant and industry consultant, said.
Consequent to the frequent enhancement of the repo rate, which increased from 5 per cent in March, 2010, to the present 7.75 per cent, the commercial banks had raised the base rates making the loans dearer.
P. Moghan, an apparel exporter and treasurer of Tirupur Exporters Association, said that the capital-intensive garment sector had been struggling to expand the production capacity because of the frequent increase in the interest rates on term and working capital loans.
“How can the current account deficit can be brought down if the exports are not enhanced,” he quipped.
According to industrialists, the RBI has never been able to contain inflation by frequently hiking the short-term bank rates as the inflation in the country was primarily caused by black money in circulation.
“They should learn lessons from the practical side of the monetary management instead of taking cues from the global theories,” the industrialists added.