New Delhi, Apr 1 UNI | 4 months ago

Disappointed over RBI's decision to maintain status quo on key policy rates, India Inc today said tweaking policy rates 'downwards' would help lift business sentiments in the country which is severely impacted by high costs of funds and other structural rigidities in the economic system like 'poor infrastructure and high transaction costs'.

"While the Reserve Bank has genuine concerns over risks to the CPI inflation which may stem from a possible shortfall in monsoon and outlook for fiscal policy of the new government, the RBI had the opportunity to give growth a chance to reinvigorate by reducing the policy interest rates and reviving the investor sentiment," ASSOCHAM President Rana Kapoor said.

The apprehensions about the inflation rearing its head again may prove to be misplaced, Mr Kapoor added.

The Reserve Bank of India (RBI) today kept the key rates unchanged in its first bi-monthly monetary policy.

RBI Governor Dr Raghuram Rajan, kept the repo rate unchanged at 8 per cent in the central bank's monetary policy review.

The bank also kept the Cash Reserve Ratio at 4 per cent, but cautioned that inflation risks could resurface.

"RBI Governor Dr Raghuram Rajan himself has expressed concern over the fact that subdued industrial activity continues to be a drag on the economy. The interest cost is one of the key components of the industrial output on the one side and demand revival on the other. Thus, the boost to industrial demand by lower borrowing costs deserved a consideration," Mr Kapoor added.

(Posted on 01-04-2014)