Industry in no mood for more rate surprises
RBI should show restraint and not affect any hike in interest rates in its quarterly monetary policy review on January 31 as a hike would significantly dampen demand, industry body CII has said.
By TNN |
NEW DELHI: RBI should show restraint and not affect any hike in interest rates in its quarterly monetary policy review on January 31 as a hike would significantly dampen demand, industry body CII has said.
While both CII and Ficci have welcomed the move to slash duty on Monday in a bid to check inflation, they have reservation about the move to reduce customs duty on certain items like portland cement. ���The concern, however, is in the case of commodities that are produced domestically as final products. A sharp and sudden reduction in customs duty in case of such commodities can adversely impact the competitiveness of the domestic companies engaged in the production of such items,��� said a FICCI statement.
Speaking to ET, CII president R Seshasayee said, ���The RBI should not resort to hiking interest rates. A rate hike could act as a significant dampener on demand which is being pushed by consumption fuelled by availability of credit.��� Credit availability in semi-urban and rural areas needs to be expanded, he added. ���If credit availability in these a market goes down, it would worsen the agriculture-led inflation situation,��� he said.
Inflation based on the Wholesale Price Index rose sharply to a two-year high of 6.12% in the week ended January 6, higher than RBI���s tolerable limit of 5-5.5%. ���The finance minister has acted swiftly in taking a step to contain inflation without waiting for the formality of the Budget. The calibration of duties to respond to the market���s requirements is commendable,��� the CII president said.
He said that scrapping duty on items like portland cement was not a good idea as it adds to constraints faced by the domestic industry. Mr Seshasayee said that CII is particularly concerned about the sustained price pressure from primary articles, which is fuelling the high rate of inflation.
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���Agricultural reforms are a crying need. The government needs to stop any further land fragmentation, dismantle debilitating structures of intermediation and invest in rural infrastructure and connectivity,��� Mr Seshasayee said. Download
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