The Director General of the Confederation of Indian Industry (CII), Chandrajit Banerjee, on Friday described the Reserve Bank of India's (RBI's) move to raise the Repo Rate and keep CRR unchanged as exceptionally important for the Indian economy, which is currently passing through a difficult phase.
In a staement, Banerjee said: "This review of the monetary policy has come in the midst of multiple challenges that the economy is faced with. The real economy is going through one of the most diffficult phases in recent history and sustained action from the government and the RBI are warranted to get growth back."
"Against this backdrop, the announcements today are exceptionally important. We understand that the RBI needs to strike a balance between inflation, currency and growth - which is a extremely difficult. Industry would have liked reduction in headline rates. The reduction in MSF by 75 bps is encouraging as this is working as the short term interest rate," Banerjee added.
"However, the increase in repo rate could have been avoided, as industry is already reeling under pressures of high cost of capital and low availability in a tight liquidity situation," Banerjee said further.
"The commitment by the U.S. Federal Reserve to continue with the quanitative easing had provided India with an additional elbow room by allowing the rupee to be supported by external inflows for the near future. Therefore, the increase in repo rate has come as a surprise," he added.
"The CII is fully appreciative of the RBI's concern on inflation, but as we have been pointing out all along, this is a supply side led issue, and therefore, at this point of time, growth should have found priority for the Central Bank," Banerjee said.
