Dear Governor, Please Cut Rates By At Least 25 Basis Points: ASSOCHAM To Urjit PatelRBI Governor Urjit Patel during the fourth bi-monthly monetary policy announcement at RBI headquarters in Mumbai, India. (Arijit Sen/Hindustan Times via GettyImages)  

Against the backdrop of a decline in factory output and inflation at a five-year low, the Associated Chambers of Commerce and Industry of India (ASSOCHAM) on Sunday wrote to the Reserve Bank of India (RBI) Governor Urjit Patel, stressing the need to cut at least 25 basis points in the policy interest rate, ahead of the meeting of the Monetary Policy Committee scheduled for 2 August.

“After a long duration of consistency in the repo rates, ASSOCHAM believes that the RBI could reduce the policy rate by 25 basis points,” said secretary general D S Rawat, in his letter to the RBI Governor.

It said a strong case was made out for a reduction in the interest rates, keeping in mind new lows in both the Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation. “The CPI in June reached an almost-five year low at 1.54 per cent, from 2.18 per cent in the previous quarter. The WPI also eased to 0.9 per cent from 2.17 per cent.”

The case for rate-cut is additionally strengthened by an ease in food inflation to (minus)-2.12 per cent from 0.31 per cent. Good monsoon forecasts for the current financial year have additionally created a stance for further reduction in the food inflation. The current account deficit also continues to remain stable on account of stability in the crude-oil prices, since the last year.

“The deceleration in factory output growth could further bolster the case for a rate cut next month to boost Asia's third-largest economy, which grew 6.1 per cent in the January-March quarter - its weakest pace in more than two years,” the chamber said.

Hoping for a due consideration of its demand, the ASSOCHAM further said the RBI also needs to come out with a special dispensation for loan recovery from the small and medium enterprises (SMEs), as also the mid-sized corporate, apart from directional guidance and softer measures on recovery from SMEs and mid-corporate.

In their plea to the committee, Rawat said given the high leverage causing a big drain on the balance sheets of a large number of companies, a cut in the lending rates would be a big relief to different sectors of the economy. (ANI)

An Appeal...

Dear Reader,

As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.

We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

Become A Patron
Become A Subscriber