Bangalore Chamber of Industry and Commerce (BCIC) today expressed its disappointment over Reserve Bank of India not effecting any change in Cash Reserve Ratio (CRR) and Repo Rate in spite of high expectation on interest rate reduction. However, BCIC feels that assessing the current macroeconomic situation, RBI has very little elbow room to maneuver and hence decided to keep the CRR Rate at 4.75 per cent Repo Rate at 8.0 per cent unchanged.
Mr. H V Harish, Vice President, BCIC said: “There was a strong expectation from industry, given the negative sentiment about India and the weak growth outlook that RBI will cut interest rates and improve liquidity by reducing CRR. This was even more required given that industrial growth has fallen to a dismal low of 0.01 percent for April 2012. The RBI seems concerned about inflation and hence kept it stance on interest rates unchanged. We believe this will increase inflation as it will give rise to cost pressures for the industry and also have an adverse effect on exchange rates given the weaker industrial growth and economic outlook. Hence, while the core problem which is being sought to be addressed of inflation will not get addressed it will further weaken economic growth. We hope the Government of India will take adequate steps to address the economic slowdown on an urgent basis now that they seem to have addressed the Presidential issue.”
While Mr. Venkatakrishnan, Chairman, Finance and Banking Expert Committee, BCIC said: “RBI has put the onus on the Government for appropriate response to correct the negative sentiments. It probably also want to conserve all ammunitions at RBI’s command just in case developments in Europe warrant significant interventions in interest rates, Forex and Rupee liquidity markets. Greece has voted to stay in the Euro but speculators are likely to focus on other areas to keep the uncertainty high”
Sourced From: Bangalore Chamber of Industry and Commerce (BCIC)
Mr. H V Harish, Vice President, BCIC said: “There was a strong expectation from industry, given the negative sentiment about India and the weak growth outlook that RBI will cut interest rates and improve liquidity by reducing CRR. This was even more required given that industrial growth has fallen to a dismal low of 0.01 percent for April 2012. The RBI seems concerned about inflation and hence kept it stance on interest rates unchanged. We believe this will increase inflation as it will give rise to cost pressures for the industry and also have an adverse effect on exchange rates given the weaker industrial growth and economic outlook. Hence, while the core problem which is being sought to be addressed of inflation will not get addressed it will further weaken economic growth. We hope the Government of India will take adequate steps to address the economic slowdown on an urgent basis now that they seem to have addressed the Presidential issue.”
While Mr. Venkatakrishnan, Chairman, Finance and Banking Expert Committee, BCIC said: “RBI has put the onus on the Government for appropriate response to correct the negative sentiments. It probably also want to conserve all ammunitions at RBI’s command just in case developments in Europe warrant significant interventions in interest rates, Forex and Rupee liquidity markets. Greece has voted to stay in the Euro but speculators are likely to focus on other areas to keep the uncertainty high”
Sourced From: Bangalore Chamber of Industry and Commerce (BCIC)
