India needs an enabling environment in order to spur the investment, besides reduction in interest rates by the Reserve Bank of India (RBI), according to the HSBC Country Head Naina Lal Kidwai.
Kidwai asserted that although high interest rates are impacting investment and consumption demand, which are needed to be reduced, there is also a need to improve the business environment in the country. Regarding the possibility of interest rate cut by the RBI, she mentioned that central bank is likely to see sustained improvement on inflation front before making an interest rate cut. However, the RBI should not increase rates amid declining industrial growth. Indian industrial output for the period April-January 2013-14 stood flat over the corresponding period of the previous year. On the other hand, CPI inflation eased to a 25-month low of 8.10% in February, as against 8.79% in January.
The central bank, which has maintained a hawkish interest rate regime in order to tame inflation, is scheduled to announce the next monetary policy on April 1. The latest decline in retail inflation is much on the expected lines of the apex bank which had hiked key interest rates by 0.25 per cent in its previous third quarter monetary policy review.