Chambers Ask RBI to Refrain From Further Rate Hikes

Wednesday, August 31, 2011
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New Delhi: Concerned over slowing economic growth, India Inc today urged the Reserve Bank of India (RBI) to refrain from further hike in key policy rates at its monetary policy review next month. "CII would urge the RBI to refrain from hiking interest rates in the forthcoming policy, taking note of the weakness in the economy," The Confederation of Indian Industry Director General Chandrajit Banerjee said. Indicating slowdown, GDP growth rate for the April-June period slipped to 7.7 percent, the lowest level in six quarters. The Indian economy grew by 8.8 percent in the corresponding period a year ago. During the quarter ended June 30, 2011, growth in the manufacturing sector, which accounts for 16 percent of GDP, dipped to 7.2 percent from 10.6 percent in the corresponding period of 2010-11. The mining and quarrying sector grew by just 1.8 percent during the quarter under review, as against 7.4 per cent growth in the first quarter of the previous fiscal. In its analysis of the GDP number, industry chamber FICCI said going forward industry growth rates are unlikely to be better and overall growth for the fiscal might be below 8 percent. "If the current trends are any indication, FICCI estimates that the GDP growth in the current fiscal may be in the lower band of 7.5-8 percent with some significant downside risks," FICCI said. Industry players argue that high interest rates regime is affecting output by way of project delays on account of slowing investments. The RBI has already hiked policy rates 11 times since March 2010 by a cumulative 325 basis points to control inflation. Industry chamber Assocham secretary general D S Rawat said the GDP figures show that the government's monetary policy has started yielding results with inflation and demand showing signs of compression.
Source: PTI
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