"It needs to be understood that with a steadily declining GDP growth, millions of livelihoods are under threat and therefore, a very inflation-centric policy measure appears to have missed the bigger picture," CII Director General Chandrajit Banerjee said.
In a scathing attack to the RBI, Ficci said: "The RBI decision to not reduce the repo rate is even more difficult to understand in light of its own admission that 'the persistence of overall inflation both at the wholesale and retail levels, in the face of significant growth slowdown points to serious supply bottlenecks and sticky inflation expectations'."
RBI, however, defended its decision of not tinkering with the rates, saying in the current growth-inflation dynamic, several factors were responsible for the slowdown in activity, particularly in investment, "with the role of interest rates being relatively small".
It is not clear at all how the supply bottlenecks and high level of vegetables and protein prices, which is the main cause of persistent inflation, will be tackled by keeping interest rates high, Ficci added.
Due to lack of reforms, coupled with continued high interest rate policy by the RBI, the economy is headed for a long period of 'slowflation' which will bring us closer to a major crisis, the chamber added.
"Therefore, a cut in the repo rate would have been very timely and may have provided some boost to the already flagging growth," Ficci Secretary General Rajiv Kumar said. MORE
