With inflation falling to 3-year low in April, India Inc has raised the demand for further cut in interest rates by the Reserve Bank of India (RBI) to boost industrial production and revive the country’s economic growth.
Meanwhile, declining for the third straight month, inflation has returned to the comfort zone of the Reserve Bank for the first time since November 2009. The rate of inflation, based on monthly WPI, slowed down to its lowest since 2009 at 4.89% (Provisional) for the month of April, 2013 (over April, 2012) as compared to 5.96% (Provisional) for the previous month and 7.50% during the corresponding month of the previous year.
FICCI President Naina Lal Kidwai said the softening in inflation have given more space to RBI to consider further rate cuts, which is important as the lending rates have not really come down despite a 1.25 per cent cut in repo rate between April 2012 and May 2013. While, ASSOCHAM Secretary General D S Rawat said that it is the time to boost investor sentiments and the policy makers have to ensure that the cost of finance to the end-user becomes competitive. Further, the Federation of Indian Export Organisations (FIEO) said that the RBI should revisit interest rate regime as high interest rate is affecting manufacturing and exports.
However, in order to boost growth amid some softening of inflation, the central bank earlier this month cut the key interest rate by 0.25 per cent. It is scheduled to announce its mid quarter policy review on June 17.
