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RBI must cut interest rates for economy’s growth pick up: India Inc

13 Sep 2013 Evaluate

Enthused by the better than expected Indian industrial production (IIP) growth in July, India Inc has asked the Reserve Bank of India (RBI) to cut interest rates in the coming monetary policy review in order to attract much-needed investments and to boost the economic growth. Industrial production, after declining for two straight months, entered into positive zone in July, recording a growth of 2.6 percent on account of improved performance of manufacturing and electricity sectors.

The Confederation of Indian Industry (CII) Director General Chandrajit Banerjee said that in the near term, an easing of key interest rates by the central bank will enhance demand of some ailing sectors like consumer durables. Referring to the manufacturing sector, Banerjee said that the sector is performing far below its potential, so, significant interventions are required to enhance manufacturing sector competitiveness. Further, the National Manufacturing Policy (NMP) now needs to be implemented with some alacrity, he added. Meanwhile, manufacturing sector output, which constitutes over 75 percent of the index, witnessed a robust growth by 3% in July compared to the zero growth in the same month of previous year. However, during April to June period of 2013, manufacturing output declined by 0.2 percent over the same period of previous year. 

Conversely, Assocham Secretary General D S Rawat said that the RBI must announce rate cuts in the mid-quarter review of its credit policy due on September 20 as there is a need for creating conducive environment for investments, capacity creation and augmentation of industrial production on priority basis by initiating short term feasible solutions to the current growth hurdles. During April-July, 2013, IIP growth declined by 0.2 percent. Industry body Ficci said that besides rate cut by the RBI, the government must also clear hurdles through pro-active procurement policies to ensure implementation of big infrastructure projects. Meanwhile, the president of PHD Chamber of Commerce & Industry Suman Jyoti Khaitan said the industrial production in India is set to pick up further in the coming months on the back of revival in consumer goods demand as well as improving private investments from both domestic and foreign investors.

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