RBI should cut interest rates: Assocham

The Reserve Bank of India should cut interest rates in the wake of inflation touching a five-year low, industry body Assocham said today.

"A survey of 215 CEOs and managing directors has revealed that 67 per cent of them felt the stage is set for RBI to relax monetary policy in the wake of inflation touching a five-year low of 3.23 per cent," Assocham said in a release.

The central bank is scheduled to announce its mid-year monetary policy review on October 30. The release did not mention the name of companies or sectors of the CEOs who took part in the survey or the time period when it was conducted.

The industry chamber also said 64 per cent of those responded felt if inflows by foreign institutional investors maintained their current pace, RBI would find it difficult to check the appreciation of rupee against the US dollar.

The investments by FIIs in September increased by $3,205 million compared with $1,318 million in the year-ago period, recording a 143 per cent rise. Almost 71 per cent of them believed the Indian currency may further strengthen to 37 to a dollar by the end of this financial year in March 2008, a rise of 15-16 per cent in one year.

About 84 per cent felt it would be difficult to achieve the export target of $160 billion as growth in the second half of this financial year is likely to slow down, it said.

Separately, industry body PHD Chamber of Commerce and Industry said RBI should cut the cash reserve ratio, the percentage of mandatory deposits that all banks must park with the banking regulator.

The chamber said RBI should reduce the CRR to 3 per cent from 6 per cent currently in its forthcoming review of the monetary policy. "This will improve liquidity in the system," it said in a press release.