Industry unhappy with repo rate hike

September 20, 2013 07:18 pm | Updated November 16, 2021 09:08 pm IST - New Delhi

A file picture of CII President designate Ajay Shriram (left) with Minister for Heavy Industries, Praful Patel. Photo: Ramesh Sharma

A file picture of CII President designate Ajay Shriram (left) with Minister for Heavy Industries, Praful Patel. Photo: Ramesh Sharma

The mid-quarter review of the monetary policy by the RBI has evoked a mixed response from the industry, which was hoping for a rate cut.

“We understand that the RBI needs to strike a balance between inflation, currency and growth—which is extremely difficult. Industry would have liked reduction in headline rates. The reduction in marginal standing facility (MSF) by 75 bps is encouraging as this is working as the short-term interest rate,” said Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII).

He said the increase in Repo Rate could have been avoided as industry was already reeling under pressures of high cost of capital and low availability in a tight liquidity situation. “CII is fully appreciative of the RBI’s concern on inflation, but as we have been pointing out all along, this is a supply side led issue and therefore, at this point of time, growth should have found priority for the central bank,” Mr. Banerjee added.

Industry chamber ASSOCHAM said that fighting inflation was RBI’s main priority and thus the governor had acted in a cautious manner despite clamour for rate cut.

“Contrary to the expectations, the RBI has chosen to further tighten the monetary stance giving a clear signal that fighting inflation is its core priority. Governor Dr Raghuram Rajan has acted in a cautious manner, all the financial markets were expecting rather too much from him,” ASSOCHAM president Rana Kapoor said.

“ Given the constraint of high inflation and continuing uncertain global factors (the latest US Fed stance is only a temporary reprieve) and their impact on the country’s current account deficit and domestic inflation, the RBI was not left with many options,” said Mr Kapoor.

All India Association of Industries (AIAI) said that the 75 bps reduction in MSF would not really reduce the cost of funds at which the banks borrow and thus they would not passing on any benefits to the customers in terms of lending.

The increase of 25 bps of repo rate will not reduce the liquidity of the banks and will hardly be a tool to combat the inflation which is hovering between 9-11 per cent. Inflation can only be reduced if productivity gets impetus,” said Vijay Kalantri, President, All India Association of Industries (AIAI).

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.