Ahead of the Reserve Bank of India's (RBI) bi-monthly monetary policy review, industry lobby Federation of Indian Chambers of Commerce and Industry (FICCI) on Sunday urged the apex bank to cut key lending rates and ease the monetary policy.
“Revival of capex (capital expenditure) is critical to push the growth further and create new employment avenues," said Jyotsna Suri, president of FICCI.
"While the government has given a push to public investments in infrastructure, private investments are still languishing on account of low capacity utilisation and weak consumer demand,” Suri cited.
According to the industry body, successive rounds of its business confidence survey have shown that investment outlook remains cautious, with majority participants citing availability and cost of credit to be a major constraining factor.
FICCI reasoned that the reduction in lending rates by financial institutions is the need of the hour, which has also been acknowledged by Finance Minister Arun Jaitley and the chief economic adviser recently.
"With inflation largely under control, we expect the central bank to reduce the repo rate by at least 50 basis points to expedite revival of private investments and demand for housing, automobiles and consumer durables," Suri said.
"A cut in CRR (cash reserve ratio) by 50 basis points is also desirable as it will release liquidity into the system and enable effective transmission into lower lending rates by banks,” Suri added.
India Inc. is hopeful that the better-than-expected retail and wholesale price data will prompt the RBI to cut rates and kick-start the consumer cycle in the country.
The retail inflation eased nearly 40 basis points to 4.87 percent in April, official data showed.
The annual rate of wholesale price inflation (WPI) decelerated further to its lowest in the last six months at (-)2.65 percent for April from (-)2.33 percent for the month before.
However, industrial recovery hopes have been belied with the growth in India's factory output slowing to 2.1 percent in March.
