RBI’s status quo on policy rates disappoints once again: PHD Chamber

RBI’s status quo on policy rates disappoints once again: PHD Chamber

RBI’s status quo on policy rates disappoints once again: PHD Chamber

RBI’s status quo on policy rates disappoints once again: PHD Chamber

The RBI status quo on policy rates disappoints once again as the industrial growth in the country is severely impacted by high costs of funds and other structural rigidities in the economic system like poor infrastructure and high transaction costs, said Mr. Sharad Jaipuria, President, PHD Chamber of Commerce and Industry.  

In the First Bi-monthly Monetary Policy Statement for 2014-15 by RBI, The policy repo rate under the liquidity adjustment facility (LAF) has been kept unchanged at 8%. CRR has been kept unchanged at 4% of net demand and time liability (NDTL). Consequently, the reverse repo rate under the LAF stands unchanged at 7%, and the marginal standing facility (MSF) rate and the Bank Rate at 9%.

Keeping the interest rates high to solve the structural supply side constraints has increased the economic vulnerabilities as the industrial growth is decelerating year after year but the risks to high inflation still exists, said Mr. Jaipuria

Industry growth performed in the worsening growth trajectory year after year; at 0.2% in FY2013-14, 0.8% in FY2012-13, decelerated to 6.7% in FY2011-12 from 8.5% in FY2010-11, he said

Though the interest rates during the last three years have been remained in the higher trajectory, there is little respite to inflation vis-à-vis structural supply side constraints in the economy, he added

CPI inflation, which is becoming benchmark for RBI’s policy stance on inflation, still exists more than 8% for the month of February 2014.

This indicates that solution is somewhere else and that demands a resolution in the agriculture productivity, supply side agri- infrastructure vis-à-vis public investments in agriculture sector and delivery of food mechanism.

We urge the Government to take effective measures to improve supply side constraints in the economy. Farm sector needed to be focused seriously in the coming times to resolve the structural problem of inflation and to enable economy to attain its potential growth rate trajectory, said Mr. Jaipuria

Going ahead, we expect a calibrated policy stance in the coming times that should consider revival of economic growth trajectory along with containing inflationary scenario, said Mr. Jaipuria

ENDS
Koteshwar Prasad Dobhal
Consultant (PR)