Expressing concern over meagre 1.8% IIP growth in December, India Inc today urged the Reserve Bank of India (RBI) to slash interest rates to boost industrial production, specially in critical sectors like mining.
Industry body CII said: "The RBI needs to move quickly from its pause on interest rate hikes to a policy of cutting rates to encourage investments."
In its third quarterly review of the monetary policy, RBI had announced 0.5 percentage point cut in cash reserve ratio to inject Rs 32,000 crore into the system. It kept the short-term lending rate (repo) unchanged at 8.5%.
The RBI has hiked interest rates 13 times since March, 2010, to control inflation. Industry is of the view that repeated rate hikes have made borrowings costlier and impacted investments.
Assocham said the dip in industrial growth rate in December underline the need for stimulating investments by reviewing monetary policy stance taken so far by the Reserve Bank of India.
"Amid global uncertainty, a radical policy shift is needed to retain investor confidence and ensure inflow of overseas funds," Assocham Secretary General D S Rawat said adding the latest IIP figures show deep slowdown in basic core sectors like mining and minerals.
Sharing similar views, Ficci said manufacturing companies are grappling with the rising raw-material and fuel costs besides high-interest cost. Also due to forex losses, the operating expenses have been affected.
"The growth in manufacturing and mining remains an area of concern. The growth in manufacturing is indeed subdued and with continuous negative growth of capital goods we are not looking at any uptrend in manufacturing sector in coming months," Ficci President RV Kanoria said.
The IIP figure for November, 2011, has been revised to 5.94% from the provisional estimates of 5.9%.
During April-December, 2011, IIP growth stood at 3.6%, against 8.3% in corresponding period a year ago.
