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CII welcomes RBI's decision of easing monetary policy

Posted on Jan 30, 09:29AM | UNI

Kolkata, Jan 29 : The Confederation of Indian Industry (CII) has welcomed the decision of the RBI to ease the monetary policy by reducing repo rate and CRR

In a release here today, Mr Chandrajit Banerjee, Director General, CII, said, ' At a time when slowing consumption and investment demand is derailing the growth momentum of the economy and industry, the decision of the RBI will go a long way in reversing the downward trend. ' ' The RBI's decision to ease the monetary policy through a repo rate and CRR cut is a welcome step as it sends out a positive signal that the Central Bank has now joined hands with the government to revive the growth momentum of the economy, which has so far largely focussed on containing inflation, ' Mr Banerjee opined

' The government's continued thrust on reforms along with the downtrend in WPI-based inflation has provided necessary leg-room for the RBI to manoeuvre its policy in favour of growth. However, CII would have been happier with a larger reduction in repo rate, ' he said

' Core inflation, regarded by the RBI as the key indicator of demand-side pressures, had declined sharply in the past few months. Monetary policy is not the right instrument to address the supply-side constraints facing the economy. Against this backdrop, the decision of the Central Bank to ease repo rate by 25 bps is indeed a prudent step, ' he stated

Agreeing with the RBI that reviving investment is the key to economic turnaround, the CII has underlined the need for both fiscal and monetary policy to work in tandem in order to ensure that the growth prospects of the economy are revitalised

The CII agreed with RBI that fiscal consolidation should not happen at the cost of curtailing government expenditure on plan/capital heads, which, along with removal of structural impediments, is critical for crowding in private investment to pull the economy out of the current slowdown

' For investment demand to sustain, it is important that consumer demand is revived too. Soft monetary policy stance in this regard becomes an integral part of the overall strategy to revive growth, ' iterated Mr Banerjee