Industry hails RBI intent not to hike rates further

New Delhi: Corporate India heaved a sigh of relief when the Reserve Bank of India (RBI) Tuesday said that the trip rates are increasing interest rates again after the 13th times on Tuesday.

Seeking to tame high inflation, which has hovered near double digits, the central bank raised the repurchase rate, or interest charges, this short-term borrowing by commercial banks by 25 basis points to 8.5 percent.

Automatically reverse repo rate, or interest on short-term loans, can be hiked 7.5 percent 7.25 percent.

The current increase in repo rate, however, make a car, housing and commercial loans more expensive again.

"We appreciate the RBI guidelines that further rate hikes may not be justified," Chandrajit Banerjee Director General Confederation of Indian Industry (CII) said the second quarter review of monetary policy.

CII also welcomed the proposals for structural reforms and a greater emphasis on private investment in the bid to tame inflation.

"Some of the areas that need immediate attention include clarity of the land policy and the availability of critical inputs such as electricity," Banerjee said.

At the latest rate hike of 13 straight increase since January 2010. Since then, growth began to slip, India Inc has been clamoring to stop the tightening of monetary policy.

But the RBI is entitled to any hike citing high inflation.

Recent data showed annual inflation rate based on wholesale price index in August, inching closer to a two-digit at 9.78 percent, while food inflation in double figures.

Federation of Indian Chambers of Commerce and Industry (FICCI) said was expected to increase by 25 basis points, but its inflation forecasts can be off the track on the depreciation of rupee could add to inflationary pressures.

FICCI also said that the apex bank forecasts inflation rate of seven per cent by March 2012 may be underestimated because it is based solely on the impact of hike in key interest rate loans.

"It is based almost entirely on the hope that the higher base effect of lower inflation in the coming months. A clearer statement would be specifically to combat the rapid decline rupee appreciated," said FICCI Secretary General Rajiv Kumar.

"It is encouraging to see that the RBI finally giving some important measures to offer and talk about the need to raise the potential rate of growth through the implementation of structural reforms," ​​said Kumar.

Some, however, were annoyed about the latest interest rate hike.

"We call upon the apex bank to remove the supply hiccups. We expect the pace of production and manufacturing to support the bid up the market," said Sanjiv Saddy, executive president, business affairs, Emaar MGF Land.

"It is our strong recommendation of the RBI not to raise prices even more, because it does not help the industry to come out of the quicksand. Rather, it will eventually become an additional burden and may cause economic collapse," he added.

Real estate sector has been under pressure for some time by successive rate hikes for the more expensive and demand for housing remained low.

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Articles Source:- http://economictimes.indiatimes.com/news/economy/indicators/industry-hails-rbi-intent-not-to-hike-rates-further/articleshow/10487448.cms