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With inflation plunging to nearly five-year low of 3.74% in August, India Inc today nudged the Reserve Bank to slash interest rates and lower the cost of capital in its upcoming monetary policy review.
"The industry is severely impacted by high interest rate regime coupled with increased costs of raw materials and wage rate spirals.
"At this juncture, it becomes inevitable to ease the monetary policy stance in terms of a cut in repo rate to facilitate business sentiments and to put industry on growth trajectory," President of PHD Chamber Sharad Jaipuria said.
The Reserve Bank is scheduled to unveil the fourth bi-monthly monetary policy review on September 30.
Declining prices of vegetable and other food articles brought down wholesale inflation sharply to 3.74% in August to a nearly five-year low.
"In order to address the current growth concerns, authorities need to create more conducive conditions to promote economic growth. Specifically, the RBI has to ensure that the cost of finance to the end user becomes competitive in its upcoming bi-monthly monetary policy review," Assocham Secretary General D S Rawat said.
The inflation measured on Wholesale Price Index (WPI) was at 5.19% in July and 6.99% in August 2013.
"With strong actions coming in from the Government, we are hopeful of a sustained moderation in inflation. Coming shortly before the monetary policy, this should also provide the necessary manoeuvring space to the RBI," CII Director General Chandrajit Banerjee said.
Vegetable prices contracted 4.88% in August, the third continuous month of decline.
Inflation in the food segment witnessed a significant decline to 5.15% in August as against 8.43% in the previous month.
The August WPI inflation is the lowest since October 2009 when it stood at 1.8%.
