‘Business confidence levels have dipped'

Industry bodies want RBI to cut interest rates

September 03, 2011 09:33 pm | Updated August 03, 2016 08:46 pm IST - NEW DELHI:

A view of the Reserve Bank of India building. File photo

A view of the Reserve Bank of India building. File photo

Major industry bodies have come out with reports indicating a decline in business confidence levels and have called upon the Reserve Bank of India (RBI) to cut interest rates to boost sagging industry.

The Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII) have in their separate reports expressed concern over the global economic downturn and the U.S. fiscal position and the European debt overhang which in addition to the domestic factors were generating uncertainty about the economic outlook. The FICCI business confidence index (BCI) was at the lowest level in the last two years, while the CII quarterly BCI showed a decline by 8.9 points. Both the exercises were carried out in August.

The CII, however, said expectations for the second quarter indicated a modest recovery, while FICCI forecast a further slowdown in gross domestic product (GDP) growth rate during the third and fourth quarters based on U.S. and India GDP growth correlation.

Both CII and FICCI seemed to agree on the GDP growth rate for the current fiscal. The former expects it to be in the range of 7.5-8 per cent while FICCI puts it at 7.9 per cent.

According to CII, most firms do not plan to increase investment plans and FICCI maintained that corporates saw a significant downward pressure on profit margins, affected by high interest rates and input prices. The CII held high interest rate and high raw material cost as the two top business concerns and FICCI pointed to the 11 times increase in interest rate by the RBI and said the tightening monetary policy had resulted in sharp slowdown in industrial growth and had also impacted consumer demand. FICCI suggested a cut in interest rate to boost corporate confidence including those of exporters who had taken a hit as well.

According to the CII, other factors of concern to the business community are global economic and political instability and institutional shortages.

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