Commenting on the First bimonthly monetary policy review of the current fiscal, Mr Ajay S Shriram, President, CII stated that the decision of the RBI of keeping key policy rates unchanged reflects a very cautious approach towards monetary easing to anchor inflationary expectations.  

Having said so, CII is of the view that a cut in policy rates even by a modest 25bps by front-loading of monetary easing cycle would have been a mood elevator and propelled industry and consumers to augment demand. This is especially required to provide a fillip to growth in the employment-intensive auto, consumer durables and housing industry.   

Many stalled projects are waiting for availability of credit at cost effective rates to restart the operations and eventually be a trigger for a turn in the investment cycle. These projects could be revived if RBI and banks had cut interest rates..  

Mr Shriram stated that at a time when a drastic decline in crude oil and commodity prices has helped to partially offset the major stress points in the economy namely inflation and twin deficits, there is enough space for RBI to cut rates even while delivering on the inflation mandate. The RBI has already delivered two surprise rate cuts since January and a further rate cut would have acted as a booster for rejuvenating growth. It is encouraging to note that the RBI would continue to maintain its monetary easing stance and work in tandem with the government to bring the investment momentum back to the economy. We also hope that the banks would transmit the rate cut onwards so that credit is disbursed to productive sectors of the economy. CII is looking to see a 100 bps reduction in headline rates in the course of the year. 

New Delhi
7 April 2015