Apex industry body FICCI has given thumbs-down to the Reserve Bank’s decision to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0 per cent. "FICCI is disappointed with the RBI's decision to hold on to the policy rate at the current level. A downward revision would have boosted sentiment and supported the growth momentum that we are seeing building up following the second quarter GDP numbers,” said Pankaj Patel, President, FICCI.
Pankaj Patel said that the initial signs of a turnaround in the economy need all support to translate into a solid recovery that is critical from a jobs perspective. A cut in the policy rate with some more targeted intervention in the form of easing conditions for extending housing loans would have provided the needed stimulus and complemented government’s own efforts to lend strength to the economic recovery process.
"FICCI's Business Confidence Survey shows that companies continue to face constraint of high rates of interest and are looking for a phase of stronger growth in market demand before fresh investments get committed. RBI's excessive focus on inflation has led to a situation where real interest rates are much higher today and impinging on growth performance of the economy. At a time when inflation is well within the band defined by the central bank and much of it is due to supply side factors, there is a need to rethink on this inflation focussed approach", added Pankaj Patel.