RBI should have cut interests to boost growth: India Inc

The industry argued that a rate cut would have propelled demand as interest rates remain unduly high.

"In context of the current industrial situation, we felt there was a need for a further cut in the repo rate. Growth conditions remain under strain which is reflected in the persistently weak investment activity and the first quarter GDP growth numbers," Ficci President Pankaj Patel said.

"While RBI in the policy statement cites inflationary pressures to remain a concern, Ficci feels that we need to give equal consideration to growth prospects," he added. The RBI on Wednesday kept policy rate unchanged at 6 per cent as was widely expected in view of upward trend in inflation even as it cut the growth forecast to 6.7 per cent for the current fiscal.

However, it slashed the Statutory Liquidity Ratio (SLR), the portion of deposits held by banks in government securities by 0.5 per cent to 19.5 per cent, freeing over Rs 57,000 crore to bank funds for lending.

"The Reserve Bank should have taken a bold move and cut the policy interest to boost the growth as the inflation level is still well within control," said Assocham President Sandeep Jajodia.

He claimed that while the RBI is always faced with the dilemma of choosing between growth and inflation, the overall national sentiment at present is for reviving growth and employment as the trade and industrial activity, particularly in the informal sector, is facing some disruption from GST.

"What is not so pleasant is the fact that the credit policy does not give any indication of a rate cut even in the short to medium term, so the ball for growth revival is now completely in the court of the government through fiscal measures," said Jajodia.

He expressed concern over the precarious situation that the manufacturing sector is in, observing that if the trend does not reverse with monetary and fiscal measures it would be difficult for the industry to generate jobs.