and Industry, Coimbatore
Press Release
October 27, 2009: Chamber Disappointed with RBI Policy Announcement
We are disappointed to note that RBI has kept key rates and ratios like repo, reverse repo and cash reserve ratio unchanged. The industry is yet to see a major revival and was expecting a drop in interest rates. Citing inflation projections as 6.5 per cent with an upside bias by this fiscal end from 5 per cent projected earlier, does not hold good as the rates did not come down when the inflation was down, and even on the negative.
Though the Reserve Bank has said that the increased key statutory deposit ratio for banks by one percentage point to 25 per cent will not push interest rates up, the interest rates may actually harden in the coming months. The one percentage point hike in SLR will remove over Rs 30,000 crore from the system, thus forcing banks to tighten up lending. Our Chamber feels that it is a signal of reversal of easy monetary policy.
The survey had stated that the Indian economy grew by 6.1 per cent during the first quarter of the current fiscal, below the 7.8-per cent year-on-year increase in real gross domestic product (GDP) for April-June 2008-09, but higher than the 5.8-per cent growth rate recorded during the October-December and January-March quarters. So RBI could have been more liberal in their approach.
With the US and Europe continue to be in recession, the Finance Minister has said that the Government will continue with the stimulus package. However the RBI’s announcement does not indicate this position of the Government.
Mahendra Ramdas
President