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RBI must reduce interest rates, FICCI
Jan '08
The US Fed cut is a signal for the soft interest rate regime globally. RBI should follow the cue and cut the Interest rates to support the economic growth.

RBI must cut the repo rate by at least 25 basis points this month itself and then follow up with further cut of another 25 basis points within next two months.

We have time and again reiterated through FICCI studies and surveys, the adverse impact that the high Interest rates have had on the growth of certain sectors of the economy especially in the SME segment, said FICCI President.

The Industrial Production Index has shown a clear decline, which is a sign of slowdown. The recent Business Confidence Survey of FICCI too clearly signals a fall in business confidence and possibility of imminent slowdown of several sectors.

FICCI's latest BCS, released in December 2007, showed that while initially the high interest rates affected the consumer goods industry, now even the intermediate and capital goods sectors are getting impacted.

The policy implication emerging out of the survey is very clear – RBI must ease the monetary policy stance and slowly make it more accommodative. Failure to do this would send the industry into a downward spiral and make recovery particularly difficult.

Now that the inflation is also down to tolerable limits, we do hope that RBI would re look at the interest rates and some measures would be taken soon to move towards a soft interest rate regime.

An impetus from RBI in form of easy Interest rate regime would help provide necessary impetus to the growth. The RBI must shift from its emphasis on controlling inflation to keeping growth going, said FICCI President.

Federation of Indian Chambers of Commerce and Industry

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