CII - Do not sacrifice growth over price stability
07 Apr '08
3 min read
CII is of the opinion that the RBI should opt for either the second or third option. CII does not see any indications of heating up in the economy. With liquidity conditions under control, the challenge for RBI would be to manage inflationary expectations.
CII is also of the strong view that restricting demand to manage supply side constraints would not augur well for growth. The recent fiscal measures to enhance supply of Rice and Edible Oil would faster than a macro measure such as interest rates, though interest rates are the best tool adopted by Central Bankers across the world to contain inflation.
The RBI could keep a close watch on the price situation post the fiscal measures and then resort to any monetary measures, CII added. With global economic conditions worsening along with increasing price trend of commodities globally, any move that will choke investments in the economy will add to the declining IIP and prolong a turnaround.
Hence RBI could send a strong signal that interest rates would be cut to stimulate investments and growth or in a worst-case scenario, maintain status quo on monetary measures. This signalling is very important at this juncture to stimulate growth through investment expansion.
20240830145952.gif)
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "UBM China (Shanghai)")
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
